If your practice needs to take on another doctor, before deciding whether to recruit a partner or salaried GP, it is sensible to first take a look at the purely financial implications.
Once you have done the sums, you can consider which non-money factors are key to your decision in the clear knowledge of the financial costs to the practice.
While it used to be financially advantageous for continuing partners to replace those leaving the partnership with salaried GPs, this trend appears to be reversing. Nowadays there is little financial difference between having a salaried GP or a new partner.
- Must pay deductions to HM Revenue and Customs from the doctor's salary for income tax and employee's class 1 national insurance contributions (NICs). It must also deduct and pay over the doctor's NHS Pensions Scheme employee rate contributions.
- Bears the cost of the employer's share of the doctor's NHS Pension Scheme contributions and employer's class 1 NICs.
- May also pay other expenses such as the doctor's medical indemnity costs and locum insurance to cover sickness absence.
- A partner comes under the self-assessment tax system, is technically self-employed and responsible for meeting their own income tax and class 2 and class 4 NICs liabilities.
- While income tax rates and personal allowances are the same for salaried GPs and GP partners, the latter's self-employed status will tend give them more leeway to claim for tax deductible expenses.
For employees, an expense is tax deductible if it is incurred ‘wholly and exclusively and necessarily’ for the purposes of their work.
With self-employed status, an expense only has to be 'wholly and exclusively' incurred. Whether an expense is ‘necessarily’ incurred is not relevant.
Equity and fixed share partners
There are two main kinds of partner: equity partners with an entitlement to an agreed percentage share of net practice profits and fixed share partners entitled to a specified amount.
Equity partners will know in advance the financial impact that a fixed profit share partner will have on distributable profits, just as they do with salaried GPs. However, they will not know for certain how much their respective net profit share will be until the practice accounts have been completed after its accounting year end.
Practices need to bear in mind that if a fixed profit share is set too high then the equity partners risk reduced (or in extreme cases no) surplus profits to be shared among them.
In recent years primary care organisations have shown antipathy towards practices with only one GP principal and this has been a factor in some single-handed GPs deciding to replace a salaried doctor with a partner.
Who will keep the practice going when the current partners retire also plays a part in some practices deciding to replace departing salaried GPs with partners.
As they 'own the business', partners can be expected to undertake more administrative burden and are more likely to want an active role in managing and developing the practice.
Partners may be able make use of limited companies to reduce some of their tax and pension contribution burdens.