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Practice accounts when a partner leaves

Simon Gray explains the options for calculating the final profit share of a partner who is departing.

Working out an ex-partner's final profit share can be tricky (Image: iStock)
Working out an ex-partner's final profit share can be tricky (Image: iStock)

There are many financial and business issues to consider when a partner leaves a GP practice and sorting out what their final profit share should be is a major one. Quite literally, there needs to be ‘an accounting’: a set of accounts that lays out the figures.

The accounts preparation would be easy if a partner chose to leave on the same day the practice’s accounting year ends.  

Alas, partners can and do leave practices on any day of the year. As a result, the annual accounts will often not suffice in terms of determining the accrued profits that are due to the retiring partner.

Next annual accounts

The easiest way to determine profit share accruing to a partner up to the date they leave is for the accountant to prepare a normal set of practice accounts up to the next regular year end date.

Then the accountant time-apportions the results so that the correct profit share is attributable to the ex-partner.

However, the time lag between the partner leaving and the following year end and then the further time period after the year end until the accounts for that year are finalised, will often be unacceptable to all parties concerned.

Interim accounts

An alterative is to prepare a ‘short period’ set of practice accounts up to the date of the partner’s departure in addition to the regular set of year end accounts. 

There are several issues with this that need resolving, such as who will pay the accountant’s fees for this extra set of accounts?

Also, getting the timing right is key: often payments relating to the period, such as seniority and QOF, may take a while to flow through to the practice.The partnership should hold off on interim accounts until the size of these amounts are known with a degree of certainty.

Tax and superannuation

As well as the accounts, you should also consider the tax and NHS superannuation aspects.

If the practice has an accounting year ending on a date other than 31 March, the partners will have paid an element of tax twice on some of the profits during their early years in the partnership, regardless of when exactly in the tax year they became a partner.

Tax relief on this element of ‘overlap tax’ as it is called is only available on certain occasions, including when a partner leaves.

A similar situation exists for superannuation in that any overlap superannuation attracts relief when a partner leaves.

Accounting options

Interim accounts

Time-apportioned annual accounts


Timescales are often more acceptable to all parties

All variables and unknowns have been eliminated


Often prepared too soon before all monies due have been received

Time delay is often too long

  • Simon Gray is a partner at Henton & Co LLP specialist medical accountants, an Association of Specialist Medical Accountants (AISMA) member firm.   

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