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The waiting game

Practices should 'think twice' before signing PCN contracts, warn accountants

GP practices should be 'thinking twice' before signing primary care network (PCN) contracts, due to potential concerns around VAT and HR issues, accountants have warned.

As part of the new five-year GP contract, practices will be provided with extra funding to join networks, which will see groups of practices serve 30-50,000 patients based on geography.It is widely expected the vast majority of practices will be joining a network.

But the chair of the Association of Independent Specialist Medical Accountants (AISMA), Bob Senior, has argued that GPs who sign the network agreements 'without thinking twice and getting any legal advice are taking a surprising risk, given the profession’s general movement being increasingly risk-averse'.

In guidance published last month, NHS England said PCNs should take account of VAT.

According to NHS England, payments under the DES - the new network contract that includes funding for extended hours access and the clinical director - will be made into the bank account of the single nominated practice or provider that holds a GMS, PMS or APMS contract.

VAT charges could occur if 'a member of staff is provided by one organisation to another (e.g. secondment), as opposed to providing the services of a member of staff', and if the services provided by a practice is not considered to 'qualify as health services', NHS England said.

However, the note added that it was unlikely many of the services provided by the network would be liable to a VAT charge because they would mainly count as 'health services'.

Mr Senior said practices that bind together in a network could face unexpected bills if they do not seek legal advice before agreeing to the contract. 

He said: 'Practices genuinely seem to be regarding the network agreement as just another form to sign without really appreciating what it's doing because that network agreement is binding those practices together in relation to that PCN and therefore exposing them to any risks attached to PCNs - in particular if there is a problem with how they are passing funds, which gives right to a VAT bill.

'Those GPs who are merely signing up to the network agreement without even thinking twice and getting any legal advice are taking a surprising risk given the profession’s general movement being increasingly risk-averse.'

Recent BMA guidance suggests that certain network structures - including 'lead provider', 'GP federation/provider entity' and 'non-GP provide employer' - could result in VAT charges, as the provision of healthcare and back-office staff is not exempt from VAT. 

AISMA vice chairman Deborah Wood said: 'The implications for VAT, pensions and legal liability need to be thought through carefully and will depend on where the DES money is held on behalf of practices in the network, who employs the staff and who is responsible for delivering the service specification.

'If the DES money belongs to practices as part of their contract (GMS, PMS or APMS) it would be both taxable and superannuable gross income. However, when the money is spent on providing services, the costs will offset the income and so will have a neutral effect on tax and pensions.

'If the costs are spent on providing services supplied by another entity or by staff employed by someone else, then VAT can come into the picture and potentially layer on an additional 20% of cost. 

'It is our understanding that practices are responsible for the DES service specification being delivered at primary care network level. The network agreements will have to be written to ensure these risks are managed appropriately,' she added.

Mr Senior said: 'The focus for NHS England has been on primary care networks, what they will do and what services they will deliver, rather than necessarily thinking through how the background structure is going to work.'

He added that there may be problems with HR issues down the line. He said: 'If you have staff jointly employed these practices, what happens if one of those makes a claim for some form of discrimination? They take the practices to a tribunal and they have an award made because the tribunal finds in their favour. Who’s going to pick up the tab for that?'

The BMA said it is working with NHS England to address any VAT issues and will provide guidance 'as soon as possible'. 

NHS England declined to comment.

Readers' comments (7)

  • ‘NHS England declined to comment.’
    Is that a metaphor for ‘Don’t know, Don’t care’?

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  • Usual back of a fag packet contract changes, with little if any thought to the unintended consequences.

    I’m just looking at changes to this years QOF: mental health review now costs more to do than generates in income as some points removed. Diabetes targets adjusted for frailty, but no advice on how frailty to be measured or coded...

    We will get the flawed searches and IT halfway through the year, and then the all restrospective coding and exempting will doubtless be needed.

    This PCN business though trumps all the usual ill-conceived meddling. ‘New money’ to be squandered exclusively on HR managers, dodgy IT, management consultants, solicitors (and possibly the odd pharmacist if you can find one), or just handed straight back to the government as VAT. Pariah practices nobody wants to buddy-up with, more clashes of egos than GOT, and extended hours leveraged in with no funding.

    The only thing that can save GP is a stronger letter from the BMA

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  • @DecorumEst | Salaried GP26 Apr 2019 11:08am
    Or, far more likely, "We want to keep you in the dark whilst our border collies lead you into the pen."

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  • sceptic | GP Partner/Principal26 Apr 2019 11:57am

    You maybe right (I particularly dislike our notorious professional squabbling).
    However I firmly doubt that the CQC quislings have either the insight or motivation for such a sinister plan and suspect that they themselves are flapping about in dark of their own insecurities and moral imbecility.

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  • We can't think twice because the timetable doesn't allow it and anyone who says no will go under through loss of their enhanced service funding. It's pretty clear we're being glued together ready for privatisation and asset stripping. Does anybody care?

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  • Privatisation may not be a bad idea if it stops these yearly contract changes and hoops to jump with no one knowing how you would land.

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  • Truth finder | GP Partner/Principal29 Apr 2019 9:49am

    Privatisation may not be a bad idea if it stops these yearly contract changes and hoops to jump with no one knowing how you would land.

    : I briefly worked for one of the big private health providers. I promise you it is not the land of milk and honey.

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