Tax warning over QOF windfall payments
By Alisdair Stirling
Exclusive: GPs could face an accountancy nightmare dealing with the £28 million in overdue QOF payments they are set to receive from the Department of Health, Pulse has learned.
The payments - relating to an error with the QMAS system dating back to 2004 - will be given to practices as current income within the 2010/11 tax year, which could tip some high earning practices over the £150,000 threshold for the highest tax band.
But although the payments relate to historic underpayments, HM Customs and Revenue is unlikely to allow GPs to amend past tax returns to include them – leaving some practices no choice but to pay higher rate tax on the whole sum this year.
Practices could also find themselves in a legal battle with former partners over the repayments unless their practice agreements contain specific clauses covering the situation.
Details revealed this week show the amount owed to 8,822 practices in England ranges from just 9p to almost £21,000. And this week, the Scottish Government confirmed that Scottish GPs were also affected and will receive a total of £778,000 in backdated underpayments - an average of £750 per practice - as a result of the same error.
QOF payments to GPs in the rest of the UK are not handled by the QMAS system, so practices in Wales and Northern Ireland are not affected by the error.
Linda Willis, a GP tax specialist at accountants Dodd and Co, said practices should seek advice from their accountants over the windfall. Practices receiving a large amount – and facing a large tax bill - might want to investigate options for pleading a special case with HMRC to spread the income among previous years´ accounts, she said.
However, she said HMRC were unlikely to allow that in this case and warned that it might serve as a springboard for the revenue to launch a full investigation into the practice´s accounts.
Practices would also need to ensure the expense of reopening their accounts was worth the savings they stood to make, she said.
'It would mean a lot of accounting work - on GPs' personal certificates, practice certificates and superannuation - and would have to make a big impact to be worth it,' she said.
Ms Willis added that practices due a substantial amounts of repayments who had had a partner leave or retire since 2004 should consult their practice agreements to see whether they were obliged to repay the overdue funds.
'Most partnership agreements don´t cover things like this, and if they don't you might have a legal case on your hands, if a partner has left or retired in the intervening period.'Practices due a QOF payment could face an accountancy nightmare Practices due a QOF payment could face an accountancy nightmare Find out how much your practice is owed
To check how much your practice is due to receive as a result of the QOF error, please click here.