On the 4 February 2021 the government announced its response to the consultation in respect of public pensions. This is important as it includes your NHS Pension and sets out how the government proposes to remedy the discrimination found by the courts by transferring certain scheme members to the ‘reformed’ 2015 NHS Pension Scheme from the ‘legacy’ scheme, the 1995/2008 NHS Pension Scheme.
The response and proposed remedy are extensive but below we provide a summary of the key points.
- Dependent on age many of you will have transferred over to the ‘reformed’, 2015 NHS Pension Scheme, on 1 April 2015 or later under transitional arrangements. You will now be transferred back to the ‘legacy’ scheme, if you were in the 1995 scheme you will revert to the 1995 pension scheme rules and members of the 2008 scheme will revert to the 2008 NHS scheme rules.
- In the run up to retirement and intended from 2023, two Annual Benefit Statements will be produced showing the above to assist you in deciding when to retire.
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The Chancellor, Rishi Sunak, has announced that the furlough scheme will be extended to the end of March 2021.
It will be based on 80% of hours not worked by an employee with a cap of £2,500 and with the employers responsible for national insurance and pension contributions for hours not worked.
The Chancellor will review the position in January 2021 to determine whether additional contributions will be made by employers as it had done under the earlier furlough scheme when it was coming to an end in October 2020.
As with the previous furlough scheme, restrictions apply if you are in receipt of government funding and this applies principally to GP practices and Dentists with NHS patients but with some exceptions possibly for staff involved with private patients.
The previously announced job support scheme that was to replace the furlough scheme will no longer be implemented as the furlough scheme has been extended.
The Job Retention bonus of £1,000 per employee for previously furloughed employees who are retained until the end of January 2021 will be deferred until a later date due to furlough being extended.
Additional support for the self-employed which is applicable mainly to self-employed GP locums and any purely private self-employed consultants may also be available.
During the lockdown many of you with limited companies may have resorted to withdrawing funds from your company bank accounts over and above any normal salary and/or dividend payment taken in the past. This may have been withdrawn as a loan as opposed to a salary or dividend payment.
Below is a guide to help explain the consequences of taking a ‘loan’ from your company and what is known as the Director’s Loan Account ("DLA").
Although your company is owned and controlled by you, legally and for tax purposes it is a separate legal entity. This is important and it is because of this separate legal status and the control you exert over it that HMRC has safeguards to ensure that the funds held and owned by the company are afforded safeguards.
The Revenue pays particular attention to the DLA.
A DLA can sometimes be referred to as a Directors Current Account ('DCA'). This directors loan/current account represents monies owing to you or monies owing back to the company from you. If you borrow money from your company (instead of say declaring a dividend) then assuming the company didn't already owe the same amount of money to you, then this would show within your company accounts as a directors loan account.
Financial year end
When it comes to the financial year end an account is drawn up internally within the More...
In our previous private practice post we set out some points for you to consider as the lockdown eases and there is some return to normality. This is available on our website.
Independent Practitioner Today has also kindly published our pointers here.
Towards the end of the article we highlighted some tax planning opportunities and advice that will be set out below and for which further detailed guidance can be provided on a personal basis.
The tax planning will be split between those who practice as individual practitioners or in partnership say with their spouse or partner and those of you that have limited companies.
Sole Practitioner/Partnership
If you have a 31 March or 5 April financial year end then for the year 2020/21 the first part of the year will have seen little or no private practice activity.
The Revenue will allow the 31 July 2020 tax payment (your second payment on account for the tax year 2019/20) to be deferred until 31 January 2021.
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With the NHS and private hospitals triggering the de-escalation clause to allow some private work and NHS elective surgery, we take a look to the future from a financial perspective of how private practice can survive during the pandemic.
Income
Income for all practitioners has taken a huge hit in the last couple of months and will continue over the coming weeks.
New protocols to deal with patient consultations, investigations and procedures will mean less patients can be seen, investigated and operated on within the time span compared to pre COVID 19.
This means less income unless fees are reassessed upwards.
The private hospitals by way of the NHS block booking of their facilities effectively received a subsidy to assist them over the 3 month period that in most cases saw little use of their facilities.
The private hospitals will be acutely aware of the huge list of NHS patients needing treatment and will no doubt seek contracts to treat them for the NHS. This will provide an opportunity for additional private work but at what rates?
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The topic of annual allowance has always been a complicated one and in light of the healthcare crisis we have recorded a new webinar which explains the changes to the Annual Allowance from 6 April 2020. We also touch upon the announcements made by NHS England and NHS Scotland in 2019/20 together with a recap on the basics of the Annual Allowance and Tapering.
As many of you will know we have spent many years understanding how the growth arises in the NHS Pension Scheme for Annual Allowance and Lifetime Allowance purposes. In a number of cases we have identified incorrect Annual Allowance statements which have then been rectified following our intervention to avoid erroneous tax liabilities that were either too high or not due at all.
If you require any assistance with your Annual Allowance reviews or Scheme Pays Elections then please get in touch.
Job Retention Scheme
Following on from the Government public announcement of the grant available for staff that are furloughed more details were published yesterday and can be found by clicking the link below:
Read the latest Job Retention Scheme here
It is designed to support employers whose operations have been severely affected by coronavirus.
The main point is that furloughed staff cannot undertake any work for you. This includes provision of services or generation of income.
If an employee is on reduced hours or reduced pay they will not be eligible for the 80% grant.
The scheme applies to any type of contract including:
- Full time
- Part-time
- Employees on agency contracts
- Employees of flexible or zero-hour contracts
You must write to your employee to explain that they have been furloughed and keep a record of communication.
Any employee hired after 28 February is not eligible.
The grant will be based on actual salary before tax as of 28 February 2020. Fees, commissions and bonuses are not included.
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Financial update
From the partners and staff at Sandison Easson & Co we owe you all a debt of gratitude during this period.
All of us have family and friends that work in various sectors of the NHS and appreciate the task that will lie ahead.
What we can do to help, as we always have, is with your financial affairs. We understand that your normal working day will be altered and as such the partners and associates will be available night or day to deal with any queries you may have.
All of us are in this together.
We will still be attending to deadlines of tax returns and accounts which will be even more important as financial planning will be on your minds and you will want to focus on dealing with patients.
The Revenue will have some flexibility with regards to tax payments. These are explained below.
Coronavirus job retention scheme
Due to the speed at which this scheme has been rolled out, there remains many areas to clarify but at the time of writing we know the following:
- All of our clients are eligible for the scheme where they employ staff through a PAYE scheme.
- Workers are given a special status of being ‘Furloughed’ (see further information below).
- HMRC will reimburse 80% of their wage cost subject to a maximum of £2,500 per month.
- Effective from 1 March 2020 if you have already had to take steps with your employees.
- HMRC are working on their systems to facilitate the above.
We understand that one of the eligibility criteria will be that a PAYE scheme has to be in place for your employee(s). Many clients pay salaries below the level required to maintain a PAYE scheme and at the time of writing we do not believe that anyone in that position will be eligible for the scheme. Additionally, anyone engaging the services of as secretary on a self-employed basis cannot use the scheme but one would expect your secretary payments to be reduced following a reduction in activity.
Where eligible, HMRC will provide funds to support the worker’s wages and prevent the need to make them redundant.
Furloughed worker
Where a business does not have sufficient work to retain the services of an employee they can designate affected employees as ‘furloughed workers’. They remain an employee and the terms and conditions of their employment are still enforceable.
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Contact Details
During the special measures period, the partners and team at Sandison Easson will largely be working from home. We do have certain members of the team in isolation and unable to work which is a dynamic situation and therefore we suggest that any queries that require an urgent response are directed to the partner or associate that is responsible for your affairs. Their contact details are:
Finally, we thank you for everything you are doing for us and our families.
