A financial ‘clean bill of health’!

Welcome to the first issue of our quarterly Peter Howard e-newsletter providing information, support and advice on financial issues.  Written specifically for doctors it covers topics that impact on you and your medical practice.  We hope that you find the content informative, bringing relevant tax and business issues to your attention.

Your feedback on our first newsletter would be greatly appreciated.

Please do not hesitate to contact us if you require further details on any of the topics or require an assessment of the effect on you or your business.  You can contact Jeanette, Catherine or Simon by calling 01937 580004 or e-mailing accounts@peterhoward.co.uk.

Does your partnership have a formal partnership agreement and, if so, is it up to date?

It is extremely important to have a written agreement. Without a formal agreement the partnership is classed as a ‘partnership at will’, which means that it is governed by British law such as the Partnership Act of 1890. This being the case, any partner can dissolve the partnership on notice to the other partners. Dissolution of the partnership would result in termination of the PMS/GMS contract, staff would be made redundant and the bank could call in funding. In addition, all assets would have to be sold and the proceeds distributed. Furthermore, if the majority of the partners were unhappy with the performance of one partner, they would have no power to expel the unsuitable partner without dissolving the partnership.

Partnerships that don’t have formal agreements usually argue that there is no need for a formal agreement because the partners are all friends. However, it’s amazing how quickly friendship can become animosity when disagreements do arise.

Assuming that a partnership agreement does exist, it is important that it is reviewed on a regular basis to take account of changes in the way in which the partnership currently deals with matters such as prior shares of profits, and also to take account of changes in legislation such as the introduction of the new white paper. For example, agreements which were drafted many years ago and which haven’t been revised, will not include any reference to QOF income and how this should be dealt with if a partner leaves during the year.

A partnership agreement should set out the rules governing how the partnership operates and should cover all eventualities. The main issues, which should be covered, are as follows:

• Partners’ duties
• Normal working hours and holiday entitlement
• Financial arrangements regarding sick leave and maternity/paternity leave
• Decision making procedures and method of arbitration for unresolved disputes
• Where surgery premises are owned rather than rented, the proportions of ownership
• Profit-sharing arrangements and calculation of monthly drawings
• Partnership capital requirements
• A clear explanation of any income sources which are to be classed as the partners’ own personal income and, therefore, not included in the partnership’s accounts (for example, hospital appointments done in a partner’s own time)
• Reserves for taxation and superannuation liabilities
• Procedures to be followed upon the retirement or death of a partner. This should include the basis upon which assets are to be valued, whether to produce interim accounts or time-apportion the normal annual accounts, how to determine the proportion of QOF income to be reserved for up to the date of retirement, reserves for taxation and superannuation liabilities and possible future claw-back re abatement of seniority allowance.
• 24 hour retirement and right to rejoin the partnership
• Procedures to be followed in the event of a partner becoming disabled
• The right to expel a partner and the basis upon which this can be done
• Partnership accountants and preparation and approval of accounts
• Appointment of new partners

A model partnership agreement, setting out the main clauses that should be included, can be obtained from the British Medical Association. However, this pro-forma agreement should be regarded only as an aide memoire, and be amended to take account of each partnership’s own particular requirements. The actual partnership agreement should be drawn up by a solicitor, (preferably one who is experienced in acting for medical partnerships), but the draft document should be reviewed by the partnership’s accountants prior to being signed. This is to ensure that the procedures contained in the agreement do actual concur with the accounting practice currently being followed by the partnership.

Andrew Bell, a Chartered Financial Planner with Peter Howard Financial Services Ltd offers the following pensions information.
As recent changes to the NHS Pension Scheme begin to filter through Parliament and become enacted into law, there are some key dates which members of the Scheme should be aware.

  5th April 201      2 –  the deadl  ine for members registering for Fixed Protection on their benefits. Fixed Protection is designed for members who believe their benefits may exceed £1.5 million after 6th April 2012. There are a number of strict conditions attached to Fixed Protection so professional advice should be sought before taking action.

  6th April 2012   –  the proposed date when members’ contributions to the Scheme will increase by between 0.6% for the lowest earners, up to 2.4% for the highest earners. However, even after these changes the Scheme is likely to remain excellent value for money, but the impact may affect the cash flows of individuals and their practice.

  6th October 2013   – the deadline that the NHS Pension Scheme is obliged to meet to provide Annual Allowance Statements to those individuals who exceeded the Annual Allowance in either the 2011/12 or 2012/13 tax years.

In order to meet the submission deadline of 31st January 2013 for your tax return for the 2011/12 tax year, it is possible that your figures will need to be estimated for the tax return, and then amended in the following twelve months.  Calculating the estimate is highly specialised work and you should ensure that you obtain the appropriate advice, as it is the member’s responsibility to ensure that any excess annual allowance is included in their tax return.

Peter Howard Financial Services Limited is the first Wetherby based financial advice practice to be awarded “Corporate Chartered Status” by the Chartered Insurance Institute. They have extensive experience in assisting and advising members of the NHS Pension Scheme.  If you should require any further information about pensions or any other aspect of financial planning, please contact Andrew on 01937 580004 or accounts@peterhoward.co.uk.

GP’s Personal Expenses

Can I make a claim for spouse’ s wages?

With “out of hours” responsibilities decreasing it can be harder to justify spouse’s wages for most GP’s. However they can be justified for:

• Telephone answering
• Secretarial services
• Chauffeuring
• Assistance with patients (if medically qualified)
• Appointment scheduling

The salary would need to be at a commercial rate and no more and caution must be taken if your spouse has another employment.

Can I claim more than £3 per week for use of home?

If you work from home, for example to study, you can claim a deduction for the costs relating to this. HMRC will generally accept that you can claim £3 per week without further evidence. However to claim above this, detailed records should be kept listing the costs, which are then apportioned based on the number of rooms used and hours used.

What areas are being looked at by HMRC?

HMRC’s focus recently has been targeted at private use adjustments, therefore you must ensure that you have records to back up any adjustments and to justify claims made. This would include mileage logs for motor expenses and details of work or study done at home.

Peter Howard & Co have over twenty years’ experience of acting for doctors, a proven track record of success for their clients and have a thorough understanding of all financial aspects of acting for GP practices.

Peter Howard Financial Services Limited is the first Wetherby based financial advice practice to be awarded “Corporate Chartered Status” by the Chartered Insurance Institute. They have extensive experience in assisting and advising members of the NHS Pension Scheme.

November 2011 - Issue 1