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.