Latest News

Primary care networks or PCNs have been with us for a year or so now in England and we are now at the stage where the PCNs will need to produce an account of its finances.  Over the last 12 months there has been much talk of how monies will be spent and in some cases the PCNs will have a surplus of funds which needs to be considered as HMRC may treat this as income earned by the practice and expect individual practices to pay tax on this surplus.

The accounting treatment of the PCN monies from an individual practice perspective is therefore important as is the sharing of resources and the clinical director role.

We can help with the preparation of the PCN finances and can discuss the best approach to minimise the tax impact on practices. If you would like to engage us to prepare the finances of the PCN, please get in touch. 

PCNS - a recap

The PCN concept was to bring practices together to collaborate on how certain services are delivered and provide an opportunity to share costs creating some economies of scale. This concept was introduced in the NHS 5 year forward view to encourage practices to work at scale.  With only a relatively small number of practices formally merging, being part of a PCN could be considered as a watered down version of a merger.  We expect to see more funding streams delivered through PCN networks in the coming years.

Each GP practice was required to be included within a PCN and choice was given as to how each PCN was set up.  There is a variation of structures but the most common are the ‘flat’ model and the ‘federated model’. In time we expect to see more PCN’s forming their own formal business e.g. limited company to deliver the services through but many chose to keep things simple whilst the PCNs are not too complex.

The flat model

The flat model requires one practice to be a fundholder and no doubt a separate bank account was set up for this.  The fundholding practice is holding money on behalf of the other member practices in relation to the services it is responsible for.

In some cases there have been delays in the delivery of certain aspects as well as ‘profit’ to account for on the services delivered. It is important that the accounting for these is considered by both the PCN and the individual practice. We can help with this.

The flat model should limit the risk of being the fundholding practice unlike being under a ‘lead’ practice model where the practice is responsible for the delivery of services.  If you are unsure of your PCN status please get in touch.

Despite not being a trading ‘business’ in its own right, the PCN will need to provide a summary of funds in and out to its member practices.  If the fundholding practice is carrying surplus funds as at the NHS year end i.e. 31 March, the accounting of these monies needs to be considered carefully. HMRC would argue that each practice should show their share of any surplus funds within their respective practice financial accounts and pay tax on this income. However, there are often ways of treating this differently so it is important that a medical specialist accountant is assisting with this.

Consideration to the practices sharing resources and administration is also important, particularly in relation to VAT.

Federated model

The federated model has also been a popular choice and hands over certain responsibilities of the PCN to your local GP federation.  We act for many GP federations and they are aware of the need to produce a summary of the funds in and out for PCN networks that they are responsible for.  It is important to note that the federation is acting as fundholder in this structure and therefore the same issues potentially arise in relation to surplus funds.

If you are working under a federated model it is important to understand if any entries are required within your own practice accounts so get in touch with your financial representative at the Federation.

Future models

It is likely that with increased services delivered through PCNs that more structures may need to be adopted.  This could entail forming a limited company where the practices are shareholders and directors.

Few have adopted this model yet due to the infancy of the PCN model but with increased pressure to deliver more services through PCNs and share resources it is inevitable that more formal structures will need to be considered.

It could also be that GP federations are more active in assisting PCNs as some are offering solutions to responsibilities under PCNs.

Issues in relation to VAT exist with all structures but in particular the model of a standalone business.  However, these can be overcome with VAT planning and we can assist PCNs in structuring themselves optimally for VAT.

From a practical perspective, issues such as lack of access to the NHS Pension scheme for PCNs operating in this way may prove a significant barrier to trading as a standalone business.  However, there are solutions available to share resources whilst maintaining access to the NHS Pension scheme.  

Clinical Directors

The role of clinical director is essential to the running of the PCN and funding was provided for each PCN to appoint a CD.

It is important that the accounting and tax treatment of this post is considered from a practice and individual perspective.  Each GP practice that has a partner who is the CD of their PCN will need to consider how the monies are accounted for in relation to the practice accounts, tax and superannuation.

Factors such as whether the partner in question is carrying out the work in their own time or as part of the practice sessions is important.

VAT is not normally an issue for GP practices that are not dispensing drugs but the role of CD may not be medical and therefore would not satisfy the VAT exemption for medical services.  For many this will not be an issue but if your practice is VAT registered or active with a significant amount of non-medical work and one of your partners is the CD, this needs to be considered.

PCNs are evolving and it is important that appropriate advice is obtained for the historic work performed and to ensure that the PCN is set up optimally for the future.  We can assist with all aspects of planning for PCNs so please do not hesitate to get in touch if you require further information.