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Tax warning for limited company GPs

GPs owning limited companies such as pharmacies are being warned they face paying thousands of pounds in extra tax bills if they join limited liability partnerships (LLPs) for practice-based commissioning.

Individually, GPs who own limited companies can earn up to £300,000 at the lower 19 per cent corporation tax rate, but if there are two such GPs in a consortium the threshold halves to £150,000.

It subdivides further if additional GPs in the consortium own limited companies. GPs in a consortium who do not own limited companies are not affected.

Stephen Blackman, a practice director in Earls Barton, Northamptonshire, told Pulse he had planned to set up an LLP consortium of 65 practices in the county for PBC, but scrapped the idea after he was advised of the financial consequences.

'If GPs or GP partnerships own a limited company then they should not join any other partnership or LLP without taking specialist tax advice,' he warned.

Mr Blackman, chief executive officer of the Northamptonshire consortium Nene Healthcare, said that if a consortium had two GPs owning limited companies their tax bill would be £16,500 higher than if they were not in the LLP.

'It is not obvious why this tax rule should apply to very large partnerships where the partners and their businesses may never have any interaction,' he said.

An HM Revenue and Customs spokesperson confirmed that tax thresholds in consortiums such as LLPs do vary if members come on board who own companies. 'A company with profits under a certain amount may claim the small companies' relief in the form of a lower rate of corporation tax.

'However, the relief may not be available to companies with smaller profits if they are part of a network of associated companies.' Mr Blackman said he was hoping to circumvent the problem by establishing a charity for the commissioning arm of the consortium and a limited company for the provider function.

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