GPs act to claw back thousands from tax paid on private earnings
Increasing numbers of GPs are setting up limited companies to save thousands of pounds in tax.
Medical accountants report many GPs have seized the opportunity to avoid paying tax on the first £10,000 of private income since the Chancellor relaxed rules governing corporation tax in last April's Budget.
The allowance for corporation tax is £10,000. GPs earning more than £10,000 in private fees pay 19 per cent corporation tax on the remaining income, compared with 40 per cent at the higher rate of income tax.
GP accountants PKF said they had helped to set up at least 120 separate private companies for GPs in the past year. Valerie Martin, head of medical services for Guildford-based PKF, said: 'It's small but it's not insignificant as there were none before. It tends to be people in partnerships.'
Tony Stringer, director of medical services at the company's Bristol office, said GPs' interest in the private company option would continue to grow. 'Having established some GPs with it we anticipate further uptake because we are developing the model,' he added.
Arthur Dixon, a senior manager at Deloitte & Touche, said two GP clients who had set up limited companies were in line to save £5,000 each on private work income of £50,000 and £30,000 respectively.
David Clough, a partner at Charles Rippin & Turner and chair of the Association of Independent Specialist Medical Accountants, said his firm had seen increasing interest from GPs. 'In the last two or three months we have probably had six that have gone ahead, and another GP has expressed an interest,' he added.
'Before, there were generally none at all.'
He said GPs for whom he had set up companies were in partnerships, but their private income had been earned outside the partnership.
GP partnerships contravene tax laws if they set up their own individual private companies and pool their private income with the aim of multiplying the tax threshold.