[DAYS_LEFT] days left of your Medeconomics free trial

Subscribe now

Your free trial has expired

Subscribe now to access Medeconomics

An accountant's guide to the Budget implications for GPs

Last week was the highlight of the accountant's year - I refer of course to the Budget.

Most Budgets just tinker with the figures, but this year there were some interesting ideas. Now before you all get too excited, many of the issues that get announced in the Budget never make it into practice, they get knocked out during the passage of the Finance Bill.

However, there was something that is relevant to GPs in more ways than one. All self employed taxpayers have to declare their income for any given tax year on the basis of what they earn rather than what they receive. In our language, this is the 'accruals vs the cash basis'.

Some taxpayers and their accountants insisted on using the 'cash' basis (ie money received) and so in 1998 the then chancellor formally ended the cash basis, in the interest of what he called 'fairness'.

In this Budget, there is a reversal. It is suggested that businesses  with a turnover (ie total income) of less than £77,000 can declare their income on the cash basis (ie income actually received and expenditure actually spent).

Of course most GP partnerships will have turnover in excess of this sum, but if the GP does outside work, or keeps the private fees themselves outside the practice accounts, then they could use this new 'cash' basis. How could it help?

Well, if a GP prepares accounts to 31 March 2013, they might choose to pay lots of bills, or delay banking their cheques until 1 April 2013 – Especially if they happen to be a 50% taxpayer and are looking forward to he reduction to 45% that comes in on 6 April 2013.

These changes are being proposed to help make tax simpler, and the thinking is that using the cash basis will make it much easer for taxpayers to access and understand the tax system.

Personally, I think it is a waste of time. The problems with understanding tax are not dissimilar to the problems with understanding medicine – neither of these are simple. Using flowcharts to diagnose medical problems tries to simplify something that cannot be simplified. Suggesting that the cash basis makes tax more accessible is silly.

The unintended consequences of these impossible simplifications undermines the respect that tax , medicine and many other issues deserve.

In the meantime, we (accountants) watch the passage of the Bill……

Have you registered with us yet?

Register now to enjoy more articles
and free email bulletins.

Sign up now
Already registered?
Sign in

Would you like to post a comment?

Please Sign in or register.

Database of GP Fees

Latest Jobs