There are various extra earnings opportunities for individual GPs, who undertake work on a personal and not a partnership basis.
If this work is done at a time when the partner could be working in the partnership’s interest, for example, doing a surgery session, it is often deemed appropriate for the income from it to be shared between all the partners.
Sharing income by pooling
Such an arrangement is often referred to as ‘pooling’. It essentially rewards the remaining partners for covering the ongoing work in the surgery while their colleague is absent doing, for example, an occupational health session for a local employer or medico-legal work.
Pooling enables every partner to share in the profits from the additional earning source(s). Unless, for example the partner hires a locum to cover their absence, if they kept the money they earned, the other partners would in effect be subsidising them.
The money can be distributed in anyway the partnership decides is appropriate: often in the partners’ profit-sharing ratios. It is sensible to include the arrangements for pooling in the partnership agreement to avoid possible conflicts.
In some cases it may be appropriate to pool only part of the income. This may be the case where the partner concerned is doing some of the work outside surgery hours or using specialist knowledge they have acquired at their own expense.
This would typically be the case if a partner had funded their own study to become a GPSI and then uses these acquired skills to obtain a primary care organisation or hospital post.
Again, the degree to which the income is shared is a decision of the partnership, but should be fair to all.
Prior allocation of pooled income
Pooling can be facilitated by either a prior allocation of profit to the partners in the practice annual accounts. Or if the income is to be pooled in profit sharing ratios, the income will be correctly distributed simply by showing it under income and in the income and expenditure account.
The pooled income will now be taxable and if applicable, pensionable by the recipient GPs. The GP who earned the income will only be responsible for tax and pension on the portion that they received.
Dealing with the outside income in the accounts can get complicated if the GP is employed on a salary for doing, say, a session a week outside the practice as tax, national insurance and pension contributions must be deducted from the salary before it is paid. Such deductions will be treated as the GP’s drawings given that a ‘credit’ for them will be allocated only to the GP alone. This can be tricky to untangle correctly in the accounts if the deductions exceed the GP’s share of salary earnings.
It may also be the case that the partner concerned will have part of their employer’s NHS superannuation funded externally if outside work is an NHS post. With this partnership group may wish to make an adjustment to compensate the remaining partners.
Ask your accountant to advise on pooling income and any compensating adjustments required to do this equitably.