GPs face uncertainty as Treasury ‘considers tax rise’ ahead of Autumn Budget

A £2bn tax rise reportedly planned by the Treasury may not affect GP partnerships as much as other industries being targeted by the proposal, experts have told Pulse.

Chancellor Rachel Reeves ‘is considering’ a new tax on limited liability partnerships (LLPs), which are currently not subject to national insurance, according to The Times. 

Reports in the national media today suggested that this would represent a ‘tax raid on GPs’ or that the tax rise would ‘target GPs’ specifically.

A report by think-tank CenTax published last month did not distinguish between limited and unlimited liability partnerships and proposed ‘partnership national insurance contributions’ as part of next month’s Autumn Budget (26 November).

The proposals laid out in the report were reportedly presented to the Treasury ‘for consideration’ and would affect 96% of GP practice partnerships, raising £250m from GPs. 

But Andy Pow, an adviser to the Association of Independent Specialist Medical Accountants (AISMA), said if the rise only applied to limited liability partnerships, most GPs would not be affected because GMS and PMS contracts cannot be held in a LLP.

Partners in liability partnerships are treated as self-employed so do not pay employer national insurance and pay a lower rate of employee national insurance.  

Unlike companies or other types of partnership, operating as an LLP provides limited liability and separate legal personality like a company, with the favourable tax treatment of partnerships. 

Mr Pow told Pulse: ‘If they’re just talking about limited liability partnerships, GPs are not going to be affected, because you can’t hold an NHS GP contract (GMS and PMS) in a limited liability partnership. If it is a general tax change to partnerships, then it could affect them.

‘It is just a historic thing of NHS contracting that it never updated it when LLPs were formed.   

‘General partnerships are very much akin to all self-employed people. You could have a distinction between a single-handed GP who isn’t in a partnership wouldn’t be covered by this regime, versus a GP who’s in a partnership that would be covered.  

‘[The proposal] is not very well thought out in terms of the real impact of this policy document. I am not sure it will run its course, particularly because there are too many complications around.’

Mr Pow said he also thought the proposal may not be an effective revenue-raiser.

He added: ‘At the moment, this is speculation based on the CenTax report. Any move in changes to partnership national insurance, you would have to have a similar change in self-employment for individuals.  

‘Also, what it will probably then lead to is a different corporate structure. So you may see a rise in GP practices put into limited companies, because if you extract your income through the limited company through something like a dividend, that that’s not subject to national insurance, whereas salary is.  

‘There are so many holes in this that I think it’s going to be quite difficult to have legislation which stops people trying to change how they operate to get around it.’ 

Graham Leyfield, group locum account manager at specialist financial services mutual Wesleyan said that should the tax rise be applied across all partnerships this would ‘disproportionally hit GPs and risk adding further strain to the NHS’.

He said: ‘For partners over 55, it could prompt earlier retirements – losing vital experience just as the government seeks to boost NHS capacity and local care, delivered in local communities.

‘It may also make the partnership model even less appealing to younger GPs, and ultimately would raise questions about whether the government still backs this model for GP services.

‘If the proposals go ahead, the sector will be hoping to see additional funding for practices next year to sustain investment in staff and facilities.’

Earlier this month, RCGP chair Professor Kamila Hawthorne urged the Government not to hike taxes for GPs.

She asked the chancellor to consider the impact tax rises have already had on GP practices, which meant that they ‘can’t afford to replace’ GPs who are retiring, ‘let alone take on more GPs’.

Yesterday primary care minister Stephen Kinnock did not directly respond to a question from Conservative MP Katie Lam who asked Mr Kinnock how the Government would protect GP partnerships ‘from further NI burdens in the upcoming Budget’. 

When asked by Pulse, the Treasury did not clarify how GPs would be affected by the reported changes and said it does not comment on speculation on future changes to tax policy.

A spokesperson said: ‘We do not comment on speculation on future changes to tax outside of fiscal events.’