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Act now to avoid VAT registration, GPs urged

GPs may be able to avoid having to register for VAT by acting now, medical accountants say.

Practices could split up partners' work for services that will become VAT-able to ensure they fell below the £60,000 VAT registration threshold.

The earlier GPs established such working patterns the better they could argue they had not split their business to avoid the new rules, they said.

HM Revenue and Customs has still to decide whether to implement European rules, which mean VAT must be levied on 'non-medical' work, such as reports for insurance companies, in April or to delay until April 2007 at the latest.

But with only six weeks to go until the end of this financial year, it looks increasingly likely there will be some delay.

Around 75 per cent of practices will be affected in some way when the rules are finally implemented.

Accountants' advice came after guidance for dispensing practices ­ that must register by 1 April following changes to rules on recovering VAT on dispensed items ­ stated their VAT registration should reflect 'actual working arrangements'.

HM Revenue and Customs guidance stated: 'If several doctors work together in a practice, they would normally be registered together as a partnership.'

Accountants said this was a strong sign that practices that already had arrangements to separate out medical reporting and other such work, would not be targeted. But once the new tax regime was in place, they would be unable to switch.

Rosemary Smith, GP liaison manager with accountants Sandison Easson in Wilmslow, Cheshire, said GPs who had historically issued invoices and received payment in their own name could most easily justify not putting everything through the practice.

She said: 'The earlier you do this the better as it would need to be brought in before the legislation and set a precedent.'

Paul Kendall, partner at Penrith-based Dodd & Co, said the strategy was similar to running a pub, where husbands and wives invoiced separately for food and drink to stay VAT-free.

He said: 'Each GP would invoice their own money. Do it before it's VAT-able and they can't say you split it up to avoid VAT.'

Ian MacKay, medical services manager at R-M-T in Newcastle, was more cautious: 'Customs will look at a business for what it substantially is. If these things were being earned by the practice and you change it they would not be too happy.'

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