- Change in pension contributions to NHSPS following new contracts will lead to shortfall issues for retiring GP’s
- GP due to retire this year and retirees over last 2 tax years urged to review financial situation
Her Majesty’s Revenue and Customs (HMRC) issued further guidelines regarding GP Contributions to the NHSPS (the NHS Pension Scheme) following changes after the introduction of new contracts for GPs in England and Wales.
According to Richard Limburg, Head of the Medical group (a specialist division servicing the medical industry) at Vantis the changes will leave some retiring GPs facing a contribution shortfall.
According to Mr Limburg, “It’s worth noting that under current procedures, a Primary Care Trust (PCT) initially deducts an estimated amount from each sum paid to practices during a financial year. The PCT then calculates the actual contributions due when the figures are known and the GP then receives a refund or has to then pay shortfall contributions.”
“There is a time lag so a GP paying the estimated contributions for say, 2004 – 2005, will not pay the balance until at least 2005 – 2006. Under ordinary circumstances this would be fine but the problem arises when a GP retires in a fiscal year and the shortfall contributions are paid in a later year, when there are no relevant earnings, because in such circumstances, no relief is due, meaning that the GP will lose out on tax relief.”
The NHSPS is an occupational pension scheme established for NHS employees. Until 1st April 2004, GPs were only required to pay the 6% contribution under the scheme rules. The GPs host, Primary Care Trust (PCT) and the Department of Health jointly paid the employer contributions of 14%.
HMRC now take the view that the liability for paying the 14% employer contribution transferred from the PCT and the Department of Health to GP practices with effect from 1st April 2004.
These pension contributions are not allowable as deductions in arriving at the taxable profits but relief can be claimed through the self-assessment tax return together with other relevant pension contributions. This only relates to NHS GP partners and not to non-GP provider partners or to practice staff.
Like everyone else, from 6 April 2006, a GP will be eligible for tax relief on their contributions to one or more registered pension schemes up to 100% of their UK relevant earnings for the relevant tax year, subject to the HMRC limit.
Retiring GPs are urged to contact their advisors to clarify their position to ensure they maintain their financial security.
If you need further information, please contact Richard Limburg using the online form below.