There has been much publicity about the current recruitment crisis in general practice and it is no secret that GPs are being ground down by ever-increasing workload and stress, coupled with falling income.
Quitting may be an appealing option and many GPs over the age of 50 are considering taking early retirement or leaving their partnerships; trends suggest many younger GPs are leaving their partnerships too.
It is becoming difficult to recruit salaried GPs and partners – recent research by GPonline suggested that around 29% of vacancies for both roles can remain unfilled for more than a year – so planning ahead for a partner’s retirement is crucial.
A partner who intends to leave a GMS partnership will need to give three months’ notice to NHS England; for PMS practices, this can be up to six months’ notice. However, ideally a partner should inform the remaining partners of their intentions earlier than this, so they can start seeking a replacement.
The practice must decide whether it intends to take on a salaried GP or a partner. Taking on a salaried GP with a view to partnership will allow you to see how the new GP fits into the practice and works with existing partners and staff. Be prepared for a lengthy search; in the meantime you may have to use locums, which can be expensive.
Property issues when leaving a partnership
If your premises are leased, you will need to approach the leaseholder to ensure the outgoing partner’s name is removed from the lease agreement. The incoming partner must be included on the lease, once appointed.
If the partners own the property, the outgoing partner will need to decide whether to hold on to their share in the property after retirement or sell this. If a replacement partner has not been found and the outgoing partner wants to sell, the remaining partners will need to purchase the share, which can be sold on once a replacement partner is found.
Where an outgoing partner sells their share in the property at their time of leaving, they will be able to claim entrepreneur’s relief, which reduces the capital gains tax to 10%. Holding on to this as an investment and selling it at a later date would incur capital gains tax at 20%.
Where there is a transfer of a partnership property between partners, no stamp duty land tax (SDLT) is payable on the transfer.
Costs of closing a practice
Retirement is not a straightforward process for single-handed GPs, who need to have a two-to five-year plan to retirement.
If a single-handed GP gives notice of their retirement, NHS England will either put the practice out to tender or disperse the list of patients, transferring them to other local practices.
Should the practice be put out to tender, all staff will be transferred to the new provider under TUPE (transfer of undertakings) although, if the list is small, it is likely NHS England will disperse the list, resulting in a huge cost to the GP.
If the surgery is to be closed, staff must be made redundant; you will need to pay statutory redundancy to all staff members who have been employed by you for two years or longer. Statutory redundancy is calculated according to age and length of service:
- Half a week’s pay for each complete year if the employee is aged under 22.
- One week’s pay for each complete year if the employee is aged between 22 and 40.
- 1.5 weeks pay for each complete year if the employee is aged over 40.
- There is a cap on redundancy payments: no-one can be paid for more than 20 years’ employment.
You will also need to review any leases to which you are signed up. For example, if you are tied into a telephone lease and are ceasing the contract early you will incur a cancellation charge, which could run into thousands of pounds.
If you are in leased premises, you will need to plan your retirement to coincide with a break clause in your lease.
If you own your premises, NHS England will stop paying notional rent when your contract ends and the list is dispersed, so unless you can sell at the time you retire, you will still need to pay the mortgage until the sale takes place.
Avoiding closing costs
To avoid the huge cost of closing your practice, consider taking on a partner before resigning, or merging with a local practice.
NHS England will need to approve a new partner. If you plan to continue working full-time until retirement, you may only wish to take on a part-time partner, who will take over the whole practice when you retire.
If you cannot find a partner to take over the practice, the alternative is to approach other local practices to discuss merger options. In this circumstance, you would usually exchange practice accounts to see whether or not a merger would be financially viable for both practices.
If you are planning to retire once the practices have merged, you will still need to be a partner in the merged practice for your notice period. You should discuss with the other practice how profits would be shared under the new partnership, even if it would only be for a short period of time.
Consider what would happen to the premises (if owned by you), and whether the merged practice needs your premises.
NHS England must approve the merger. If they do not support it, a way around this would be for of the partners at the other practice to become a partner at your practice so that they hold the contract once you retire.
Whether you decide to take on a partner or merge, you are going to need plenty of time to plan for your retirement to ensure it goes smoothly.
- Jenny Stone is a partner at Ramsay Brown and Partners chartered accountants who specialise in the finances of GPs.