GP Finance Update – Changes for 2008/09

Jenny Stone, ACARamsay Brown and Partners

Ramsay House18 Vera Avenue

LondonN21 1RB

Tel: 020 8370 7705E-mail: Jenny@ramsaybrown.co.uk

Minimum Practice Income Guarantee (MPIG)

DDRB announce global sum payments to increase by 2.7% to £56.20

Any increase in global sum will simply reduce the correction payments

Practices with MPIG will therefore not see an increase in core practice funding

Future of MPIG What does this mean for PMS practices…..

MPIG ExamplePresent Position

After Pay Increase

Practice A

Global Sum 100,000 102,700MPIG 150,000 150,000Correction Factor 50,000 47,300

No Increase in funding

Practice B

Global Sum 100,000 102,700MPIG 101,000 101,000Correction Factor 1,000 0

Increase of 1.68%

Extended Hours

Access DES & choice & booking will be replaced with extended hours DES (equivalent to £2.95 per patient)

58.5 QOF points allocated to extended hours Extended hrs DES £2.95 per patient If don’t do extended hours will lose income However, need to consider costs of offering

extended hours e.g. staff costs, costs of keeping surgery open for longer

Changes to Capital Gains Tax

Major reform from 6th April 2008 Capital gains taxed at a rate of 18% Indexation and taper relief which would reduce a

capital gain abolished Introduction of entrepreneurs relief for business

assets if individual ceasing trade Entrepreneurs relief will mean business assets

effectively taxed at 10% Entrepreneurs relief can be claimed on more than on

occasion up to a lifetime limit of £1m.

Capital Gains Example

Assumptions

Disposal before 05.04.08

Disposal after 06.04.08

Surgery Cost £150,000 in March 82Surgery now valued at £600,000

Capital Gains TaxSale Proceeds 600,000 600,000Cost (150,000) (150,000)Indexation Allowance (157,050) -Gain after indexation 292,950 450,000Taper relief - Business (219,713) -Entreprenurs Relief (4/9th) - (200,000)

73,237 250,000Annual Exemption (9,600) (9,600)

63,637 240,400

Capital Gains Tax - 40% / 18% 25,455 43,272

Tax Relief on Capital Expenditure

Purchase of fixture, fittings and equipment qualify for capital allowances

Capital Allowances prior to 6th April 08 • First Year allowance of 50%• Thereafter writing down allowance - 25%

Capital Allowances from 6th April 08• 100% of cost up to annual Investment limit of

£50,000• Writing down allowance – 20%• Cars over £12,000 maximum £3,000

Taxation of Non-Domiciled Individuals

Prior to 5th April 08• Individuals who are UK resident, but not

domiciled in UK, declare overseas income on basis of remittance

From 6th April 08• Non-Dom individual has been resident in UK for

7 yrs out of past 10 yrs• Declare all overseas income & gains on arising

basis• If want to use remittance basis would have tax

charge of £30,000• De minimis limit of £1,000

Tax Return Deadlines 08/09

Deadline for paper tax returns bought forward to 31st October 2008

Tax returns filed online deadline remains 31st January 2009

Automatic £100 deadline if late Can appeal against penalty of individual if

tax paid by 31st January

Superannuation Contributions for 08/09

Employee contributions increased from 6%

Rate of 08/09 based on 06/07 earnings Employer’s rate still 14% Earnings Cap removed for employees cont’b Earnings cap still applies to GPs have added yrs contracts

prior to April 08 and were previously capped

Annual Income

Current Contribution Rate

New Contribution Rate

Up to £19,165 6% 5%

£19,166 to £63,416 6% 6.5%

£63,417 to £99,999 6% 7.5%

Over £100,000 6% 8.5%

QUESTIONS?