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Dr John Couch explains why practices' accounts for the year 2003/4 are probably the most important ever

Most practices already have the 2003/4 accounts back from their accountants. For non-PMS practices these represent the last year of old GMS. For all practices Q&O/enhanced service money will not feature until 2004/5. It may therefore seem that there is less value in the latest accounts. For instance it is too late to review under-performing GMS areas and improve them.

In fact these are probably the most important accounts ever for various reasons. They will form your benchmark against which to measure nGMS. Non-NHS income, increasingly important, can be analysed to explore areas for expansion.

Drawings levels can also be reviewed and checked against current (2004/5) levels. Superannuation payments and forthcoming tax bills can be reviewed. Expenses should receive particular attention with 2004/5 investment (especially in staff costs) rising. Cash-flow planning is ever more vital for 2004/5 and subsequent years. The current accounts can form a basis for forecasting.

Check accounts carefully

As always it is important to check the accounts carefully. If drawn up by a competent accountant with GP experience, you should be able to highlight the successes and failures of your financial year without too much head scratching.

Read the accountant's report first and then check income, expenditure and finally profits. Compare these with the previous year and also with other practices' figures. Your accountant should have included the latter as anonymised data. Look at the balance sheet to ensure you are still solvent!

Read the notes to the accounts carefully as these should provide the detail for extracting the most important information.

Your 2004/5 global sum is now made up of most of the NHS fees, allowances and reimbursements that are shown under old GMS in 2003/4. Extract this data and adjust the staff on-costs to allow for the increases in staff NI and staff/partners' superannuation. Compare the total against your actual global sum.

If there is a shortfall, this will eat into your predicted Q&O/enhanced service income. Record your staff reimbursement carefully ­ this is the last time you will see it as a separate figure. With no forecast increase in this item for 2005/6 you will have to watch staff costs even more carefully.

Check all other income, looking especially at private earnings which are generally on a rising trend. With most practices relinquishing out-of-hours, fresher partners may feel able to put more energy into other income sources. Also check your expenses.


Your accountants, provided they also handle your personal accounts, should also include a statement of tax and class 4 national insurance payable for the coming year. The 2003/4 taxation year saw a reasonable rise in most GPs' net profits as a result of the review body award and various 'pots' of NHS money that arrived during the year.

By now you will already know that this has had a considerable effect on the tax/NI bill paid on January 31. Both the balancing figure and the half-yearly payment have risen by eye- watering amounts. Further increases will be a feature for at least another two years until Q&O payments level out.

If your practice still keeps a tax account on behalf of all partners, the total amount available and ongoing monthly savings must be reviewed unless you have already done so. If partners pay their own tax, reinforce that they must save extra both for the next tax instalment at the end of July 2005 and for another large balancing figure at the end of January 2006.


On the same note, if profits have increased you should also review drawings. While accountants have advised caution until the new contract beds in, there may still be scope for a decent drawings increase, which should help towards those tax payments! Ask your accountant for advice.

If partners' individual current account balances in the accounts are also high this is a good time to consider a distribution, unless you have plans for investment.

Forward planning

Finally, you can also use these accounts as a trigger to review and update your business plan. Opportunities offered by nGMS may not be available in two or three years, with third-party health providers closing in and future rises in health funding looking less optimistic.

You may decide that investment in extra staff, equipment and/or buildings is required. If so you must consider financing at an early stage using your current economic situation as a starting point.

Plan for the new GP superannuation system

GP superannuation stakes have been raised. Total payments to the Pensions Agency on each GP's behalf total a massive 20 per cent of superannuable income.

This is made up of 6 per cent employees' and 14 per cent employers' contributions. Whereas the former was deducted by the health authority at source and the balance added separately by health authority and Treasury, now all NHS income is paid gross with supposed top-ups to allow for employers' payments. GPs must make the whole 20 per cent payment themselves.

Another snag is that bureaucracy has ensured that receiving these top-ups is like getting blood from a stone. Indeed some of the employers' contributions on Q&O/enhanced service payments will still have to come out of GP profits.

It has been difficult for practices to decide exactly how much to pay as the new system bases superannuable income on 'net NHS profits'.

The exact figure will not be known until each practices' 2004/5 accounts are agreed towards the end of 2005 and will also take the total Q&O figure into account. This is where your 2003/4 accounts become very useful.

As most practices have a March 31 year-end, the accounts should give accurate figures for each partner's 2003/4 superannuable income. This can form at least a basis for monthly payments during 2004/5 until the top-up figure is known.

Adjustments can be made for known increases such as seniority. It is also worth calculating roughly how much superannuation payments will be needed for Q&O/enhanced services. Money can then be earmarked, rather than face a large dent in cash-flow towards the end of 2005.

John Couch is a GP in Ashford, Middlesex

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