PCNs must check payment rules for clinical directors to avoid tax penalties

Primary care networks (PCNs) have just a month to make sure they are paying their clinical director in line with HMRC rules - and to avoid possible penalties. Specialist medical accountant James Gransby looks at pitfalls for PCNs.

Specialist medical accountant and partner at RSM James Gransby
Specialist medical accountant and partner at RSM James Gransby

HMRC was invited to speak at a national conference about primary care networks (PCNs) earlier this month and many of the audience were left with unanswered questions after hearing HMRC’s stance on the taxation of clinical directors.

How does the advice that HMRC gave stack up with the legislation and is this a matter of interpretation or of fact?

A clinical director’s remuneration is set within the network contract, for example a 50,000-patient PCN would receive £34,279 toward the role and this is generally paid to the nominated practice (or federation) for onward payment to the clinical director.

Clinical director pay

There are several main ways that this may have been paid so far:

  • Via a payroll as an employee, triggering an additional 13.8% NIC on-cost with responsibility for the employer pension contribution also falling on the PCN.
  • Via an invoice from the clinical director’s GP partnership where they are a GP in a practice.
  • Via the clinical director’s personal service company where one exists.
  • Direct to the clinical director with a view to being treated as self employed income in their hands personally. Or;
  • Not paid yet at all - the PCN may be awaiting clear guidance on how it should be treated.

Whether or not this is an office position for the purpose of taxation will be determined by the facts.

Clinical directors are normally an appointed GP, who plays an important role in the management of services in the NHS and the role comes with many challenges.

HMRC advice

While it is not an ‘officer position’ in the way that GPs may immediately think, ie a directorship of a limited company (this is not the case because a PCN is not an entity in its own right), the position is clearly defined in the PCN network agreement. HMRC maintains that this fact, among others, fulfils the status of office holder under case law and therefore they believe it should be a payrolled role.

If the clinical director requests to route the payment via their own personal service company then care should be taken so as not to fall foul of the Criminal Finance Act 2017 obligations. Making payments to anyone other than the individual engaged could inadvertently be caught by this legislation where the individual GP is personally appointed to the role.

Only where a GP practice or the personal services company (PSC) of the GP is listed as the clinical director should the payer consider if the IR35 rules apply first and then consider if the conditions of liability are met and whether the relationship looks like one of an employee or office-holder, in which case again they should apply PAYE under the deemed IR35/off-payroll rules.

HMRC’s CEST tool can then be used to determine the position. Here only if the practice or PSC holds the post and it is able to substitute one GP for another in the clinical director role is gross payment a possibility.

While HMRC guidance on this is awaited each case needs to be looked at based on its own merits, as is so often the case.

For those practices who have not been paying via a payroll for 2019/2020 there is a small window of opportunity before the tax year end to resolve any incorrect position and account for the tax and NIC due and satisfy HMRC. Not doing so now could incur penalties and interest.

  • James Gransby is a specialist medical accountant and a partner at RSM

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