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June 2014 Issue 62
INDEPENDENT PRACTITIONER To day
FREE INSIDE 16-page Wealth Management Guide www.independen
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INDEPEN EN T PRACTITID ONER Today ay.co.uk
THE BUSIN ESS DOCTORS WITH MAG AZIN E FOR A PRIVATE PRACT ICE
Wealth Manage ment Guide 20 14
THE BUSINESS MAGAZINE FOR DOCTORS WITH A PRIVATE PRACTICE
In this issue
The route to business booty Some valuable lessons to avoid the pitfalls when trying to set up a new private practice P14
Publish & be damned good How becoming an author is good for a private doctor’s patients and profits P20
Bid to keep Ltd status for doctors
By Robin Stride
Consultants’ advisers are negotiating with HM Revenue and Customs (HMRC) over a tax disagreement which threatens specialists’ businesses with a potential ‘financial and legal nightmare’. Tax inspectors operating the Government’s new anti-avoidance policy believe independent practitioners are reaping tax advantages by incorporating their businesses and, additionally, selling goodwill. HMRC is convinced that a professional is unable to incorporate their business activity via a limited company, a vehicle used by many professionals to offer their services. But around 2,500 consultants in private practice currently use this trading vehicle, which accountants argue they are allowed to do under the corporation taxes acts. HMRC believes these consultants are now paying lower rates of tax at 20%, the current rate of corporation tax on a company. But accountants say it appears HMRC has forgotten that personal In association with
rates on investment income returns remain very high at 37.5% and any consultant shareholder withdrawing funds as profits will pay these rates because they are likely to be additional-rate taxpayers with taxable income over £150,000 a year. Medical accountants are currently locked in talks with HMRC to address the apparent anomalies between current tax officials’ views and what statute and their own guidance appears to allow. Tax law specialist and barrister Michael Ripley told a workshop for advisers involved that, in his opinion, professional services can be offered through the incorporation route and existing businesses with goodwill can be transferred to a limited company. Specialist medical accountant Vanessa Sanders said: ‘If any doctors or other professionals who have incorporated were forced to revert to sole trader status, they would be thrown into a financial and legal nightmare.’ Ltd companies are traditionally used to allow profits to be rein-
Indemnity costs bite The constant rise in negligence compensation threatens the future of private practice P32
ON A HIGH: Orthopaedic surgeon Mr Peter Brownson, extreme sports lover, celebrated his 50th birthday in style when he went for a sky dive and persuaded three colleagues at Spire Liverpool Hospital’s Bone & Joint Centre to leap with him from 15,000ft for a ‘bonding experience’ at Black Knights Parachute Centre near Lancaster. Luckily, the surgical expertise of John Davidson, Andy Taylor and Matthew Smith was not required on the day
vested for future growth, highs and lows of business to be evened out over several years and risks of indemnity claims to be constrained. Consultants selling goodwill – estimated to be 30% of those who have incorporated – would need to revise their tax returns and make large reclaims of capital gains taxes paid stretching back to 2010. Accountants estimate the loss to HMRC on an average goodwill transfer value of £100,000 would amount to about £7.5m in repayments. Mrs Sanders – whose firm, Stan bridge Associates, arranged the workshop to explore the knowledge and experiences of other advisers – spoke of the reasons for incorporating some consultant practices, in particular the need to move forward for the changing marketplace of private practice. She said she felt HMRC was not yet aware of medical specialists’
needs to be able to offer their services using the protection offered by the limited company as a trading vehicle. But she hoped talks would help both sides. Accountants at the meeting at London’s Royal Society of Medicine were surveyed by Independent Prac titioner Today and all were buoyant that they would be able to successfully address both the tax and commercial issues raised by HMRC. Twenty firms agreed to set up a new working party to strengthen their negotiating arm with HMRC on tax matters affecting doctors and to agree standards in accounting for consultants. Successive governments have encouraged people to set up companies and have reduced corporation tax rates from 52% in 1978 to 20% in 2014. But personal tax rates paid on profit distributions have continued to rise.