The idea that GPs could form limited companies to run their practices, and by so doing avoid paying so much income tax, is fraught with difficulties (GP, 2 March).
Not least is the fact that the GMS contract is with individual GPs, and the PCT may not allow this to be changed without a tendering process.
There is also a test case rumbling through the courts, currently awaiting a decision from the House of Lords, on the legality of paying a spouse a substantial dividend on the basis of profits not directly generated by that spouse.
The tax-saving benefit of such a scheme has been widely advocated, and indeed is utilised by many GPs already in respect of their non-NHS income, but the scale of benefit will also depend on how much of the spouse’s lower-rate band is not already being utilised. The Inland Revenue would also presumably expect the company to pay each GP a realistic salary, which would have significant class-one National Insurance implications. So although there have been changes in NHS pension rules, the level of tax savings quoted may not be achievable in reality.
Dr Simon J Shaw