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Hopefully, this year staff Christmas parties can go ahead and thoughts turn once again to gifts for staff.

Whether you are a partner in a GP practice, a consultant with a limited company, or practicing as sole practitioner or indeed as a partnership, so long as you have employees, which may include yourself, say, a director of a limited company or family member, then carrying on reading what benefits are available.

Social Functions & Parties

The Revenue allow social functions and parties that cost £150 or less per person. The cost is tax deductible for you as the employer and not taxable on your staff.

To be eligible it must be available to all staff and be an annual event like Christmas or summer barbecue.

It need not all be spent at once and can be spread to other functions and if for some reason Covid hits Christmas again it can apply to online or virtual parties.

More details can be found here.

Trivial Benefits

In addition to the above, a tax deduction is allowed for gifts given to your staff, provided they cost £50 or less to provide, are not a reward for their work performance and are not included in any contract. These gifts are not taxable upon your staff. Gifts could include non-cash vouchers that can be used for a turkey or a Christmas hamper and even alcohol. Normally, the Revenue restrict tax relief on alcoholic products for businesses.

Major online platforms provide gift vouchers.

Multiple vouchers can be given to an employee in a year with the only restriction being directors of ‘close’ companies being limited to £300 in any year.

A ‘close’ company would include the majority of practitioners with limited companies.

More details can be found here.

The partners, associates and all staff at Sandison Easson & Co hope that the above will bring some festive cheer and should you have any questions please feel free to get in touch.

Sajid Javid has agreed to GP’s delaying the declaration of earnings over £150,000 after mounting pressure from GP bodies.

Thankfully, sense has prevailed, at least for the short term.  This controversial requirement to published earnings over £150,000 was seen by many, including professional advisors, as unnecessary intrusion of privacy allowing the tabloid press to fuel more unwarranted anti-doctor sentiment.

The requirement to declare was originally published on 5 October 2021 and led to confusion amongst many accountants as to whether outside earnings was to be declared also as the guidance did not correlate with the published Statutory Notice.

The requirements to publish earnings, its timing and guidance were ill conceived.

The partners and associates of Sandison Easson & Co are more than happy to assist in whatever way possible and can be contacted below.

The Budget announcements were FAB in the sense that the Fizz of champagne would be taxed less, Airport passenger duty for domestic flights would be reduced and the tax on Banks effectively cut compared to other businesses.

Other main beneficiaries from the Budget were the NHS getting an additional £5.9 billion and individuals on income support by way of the universal credit taper.

Most of changes that will affect you next year and beyond had already been announced previously by way of additional 1.25% national insurance and dividend tax to take effect from April 2022 and the corporation tax rates increasing from 19% to 25% for investment companies from April 2023 and trading companies rate of corporation tax increasing from 19% to 25% in a step wise fashion as profits progress from £50,000 and under to £250,000 and over.

Thankfully, entrepreneurial relief for disposal of business assets and winding up of companies remains unaltered as do the rates of capital gains tax and inheritance tax.

In the run up to Christmas, thoughts will be diverted to obtaining presents that may be difficult to source what with lorry driver shortages and issues of containers ships unable to offload goods. Once the present list has all hopefully ticked off then some attention can be addressed to tax planning.

There are still plenty of tax planning opportunities ranging from:

  1. Electric vehicles and limited companies whereby there are tax advantages
  2. Setting up PAYE scheme for spouse and children who already undertake work for you. You never know furlough may be reintroduced but separate from that there are benefits from increasing State Pension entitlements and other benefits from such schemes
  3. Extracting dividends before the additional 1.25% additional tax kicks in next year
  4. New equipment may be entitled to super accelerated capital allowances of 130%
  5. If not already done so, you may look at incorporation of your private practice
  6. For those of you with limited companies, check if you have alphabet shares

Pensions - McCloud Remedy

No real changes to your pensions and how taxed by way of Annual or Lifetime Allowance, but many of you may not still be aware of the McCloud remedy whereby if you had been transferred into the 2015 Scheme, you will now be returned to the 1995/2008 Scheme up to 31 March 2022 and thereafter all NHS pension members will for future pensionable service, be in the 2015 Scheme.

This is important since if you had suffered an Annual Allowance tax charge in the past this will have to be recalculated and for most of you that this applies to, will be lower or extinguished.

This applies to all the nations of the United Kingdom.

Residential Sales – Reporting Deadline 60 days

If you sell your home or a second property that has been used as a residential property any capital gain has to be calculated, reported and where applicable tax paid to HMRC within 60 days. This applies to sales that complete on or after 27 October 2021. For sales prior to this date the deadline remains 30 days.

Solicitors for some reason fail to highlight this requirement that can lead to an accumulation of penalties and interest.

Most homes will be exempt but still best to consider if it had some alternative use or had gaps in occupancy for various reasons.

Applies to all nations of the United Kingdom.

Scotland

Thursday the 9 December 2021 will be the date that the Scottish Budget for 2022/23 will be announced by the Finance Secretary Kate Forbes. Hopefully, with what we understand will be a record £41 billion from Westminster she will have more flexibility in her decisions.

England & Wales – Annual Allowance Compensation Scheme

If you had suffered an Annual Allowance tax charge for 2019/20 and submitted a Scheme Pay Election for the NHS Pensions to pay it to HMRC remember you are entitled to compensation and such claims must be made before 31 March 2022.

The form is the same for both clinicians and GP’s, but the method differs.

Any of the partners and associates are available to discuss any matters within this newsletter or indeed any aspect of your financial and tax affairs.

In private practice, it can be common to think that your accounting system is just to record your activity to ensure an accurate computation of taxes – but it contains a wealth of useful information to help run your business. Ian Tongue looks at accounting systems and how to get the most from them.

What is an accounting system?

Systems can vary between businesses, but the key thing is that it records the financial activity of the business and that the transactions are complete and accurate.

From this source, your accountant can extract the information they require to prepare year-end accounts and tax. But there is plenty of useful information available real time to ensure you run your business as efficiently and profitably as possible.

Systems can range from simple spreadsheets to sophisticated computerised accounting packages. Often, consultants use a clinical management software package to run their business and many of those have accounting functions built in, although these would not be of the same functionality as a full-blown accounting software package.

Usually a full accounting package is not required and the necessary information will be available from the spreadsheets or clinical management system.

The basics

When running any business, you are required to keep ‘adequate’ accounting records by HM Revenue and Customs (HMRC).

It is not defined what this is, but the key requirements are for your system to report your income and expenses in a manner that provides a complete and accurate record of your financial activity.

If you are a VAT-registered business, the burden on record-keeping is higher and HMRC expects you to use an electronic system as a minimum and favours the mainstream accounting packages, but this is not mandatory.

It is important that you have a chronological record of your fee income and that you are able to identify when you were paid for the work and whether this was in full or if there is any outstanding amount.

The system should be able to provide a list of income earned by accounting period, which is a record of sales activity and you should be able to extract at any time the money owed to you. This is pretty much the most important part of the system. There should be a record of expenses by reference to when they were paid. But there can be costs that you are liable to pay that are outstanding and it is important to provide your accountant with anything of this nature, as these can be included within your accounts, or ‘accrued’ as we accountants call it. This ensures you receive tax relief on these costs at the earliest opportunity.

The ‘accruals’ concept basically means you declare your income when earned and not when you have received payment and you can claim costs when you have incurred the liability rather than paid for the cost.

For smaller businesses, you may be able to account to HMRC on a ‘cash’ basis, but often this is short lived for private practices so it is usually easier to account for things on an accruals basis from the start.

Debtors

A regular review is essential to running any business. You should review the list of fee income recorded in your financial records and compare this to work done to ensure all work carried out is billed to the insurer, patient, solicitor or hospital.

It can often be surprising how many times we come across a client saying they – or their secretary – did not bill something and they lose out. If this element of your system is not working effectively, you could end up working for free.

Recording income and its makeup between different types of work is also extremely important for the payment of the correct medical defence premiums and you should be able to split the work between clinical and medico-legal as well as any NHS-indemnified work. Not having this split could result in paying the incorrect premium.

Reviewing receipts and matching them to your fee listing is essential because errors can arise on the payment received or the patient may have an excess to pay.

Make patients aware of any excess payable to you and chase it. It may seem a small amount of money initially but it soon adds up for a busy private practice.

For consultants carrying out medico-legal work, it is important to review your debtors regularly and chase debts vigorously as payment terms can be long.

It is essential for your accounting system to be able to report any outstanding fees from earlier years as well as the current year, because the figures in your accounts are a cumulative record of financial activity.

Bad debts

For a clinical or medico-legal practice, bad debts should be minimal, but often this is not the case. The most common culprit is the patient excess, but medico-legal work with onerous payment terms – for example, on settlement of the case – can also result in bad debts. Having a bad debt means you providing your work for nothing or less than you expected, so spend time reviewing any old debts and ensure payment terms are reasonable before doing any work.

Approach embassy work with caution. This work can turn heads due to the value, but in practice getting paid is often problematic and many embassies do not expect to pay on a timely basis or to pay full price.

Expenses

Recording all expenses is very important to ensure you are maximising your expense claims and thereby minimising your taxable profit.

It can be common for costs to be paid through the business account as well as personally, particularly if you have transitioned from one trading structure to another – for example, from a sole trader to a limited company.

Your accounting records need to include all expenses, and for those not incurred through the business bank account, make sure these are recorded separately so your accountant can incorporate the appropriate claim within the accounts.

Having a robust accounting system is essential for the smooth and profitable running of your private practice.

Don’t see the system as just for sending to your accountant annually, as the information contained within the system will ensure that you maximise the return on your hard efforts.

Ensuring that all fees are recorded and collected together with maximising your expense claims ensures that you pay as little tax as possible. If in doubt about the quality of your accounting system, ask your accountant for some feedback on your systems.

Written for the Independent Practitioner Today, the full issue can be found here.