Taxing Questions

I have been talking to a lot of new locums recently and thought it would be useful to set out some of the questions I’ve been asked, which may be of interest to both new locums and salaried GPs.  I’d be happy to answer further questions in a future article – just email me at the address below.

I’ve been on PAYE up to now, so there’s no need to look at anything before I start self employment

Unfortunately PAYE does not always deduct the right amount of tax.  Doctors in training rotations are always at risk of their P45 not following them properly, or having overlapping employments – which can give rise to material under and overpayments of tax.

National insurance for sessional GPs can get very complicated.

A salaried GP, who is an NHS pension scheme member, will pay Class 1 contributions at the contracted out rate – 9.4% (and the employer will also pay a contribution). If the employment is not pensioned, then the rate increases to 11%. In both cases the contribution rate on the slice of income over £844 per week reduces to 1%.

Advice for PCTs to apply correct definition to GP locum NHS superannuation

There has been a lot of confusion and speculation recently with regard to some PCTs refusing to pay the employers contribution for a GP locum’s superannuation because, having looked back through a series of the locums invoices, the PCT has come to the conclusion that the locum should not have been paying contributions as a self employed locum but as an employee. The issue  seems to be that some PCTs seem to be mistaking the term ‘regular’ with ‘frequent’.

Therefore, with help from the Dept of Health, we have created a filter to help PCTs decide if a locum is either ‘regular’ or ‘irregular’, so that they don’t mistakenly confuse ‘frequent’ as the same as ‘regular’ and mistakenly apply the rule retrospectively.

GP locums exposed to NHS pension cost-cutting

We’ve received yet another email from a frustrated member:

I have just had my supperannuation cheque returned from [X] PCT as it is just over the 10 weeks, even though as pointed out to them i only got the paper work and cheque from the practice 1 week ago and the forms were dated so.

We wrote to the BMA 2 weeks ago (no reply yet) with this list of PCTs (as a result of our member survey) where locums have experienced problems submitting their payments where these PCTs have cited either the 10 week rule (locum form A) – or the 7 day rule (locum form B):

• Berkshire West
• West Sussex
• East Sussex
• Bury (Lancashire)
• Surrey
• Nottingham County
• Hampshire
• Oxfordshire & Buckinghamshire
• Kingston
• Wandsworth
• Croydon
• Sutton & Merton

We don’t necessarily blame the PCTs – they’re arguably just ‘doing their job’ and we’d never expect them to look at this issue particularly creatively.

Either, legislation needs to be changed in order to give realistic periods of time for locums to be paid by practices. Or, PCTs must allow locums to pay their (average) contributions by direct debit and have just one annual deadline to submit paperwork (a system that works so smoothly in other sectors such as medical protection and Inland Revenue etc).

NHS Pension Choice Exercise

From Paul Gordon of www.MacArthurGordon.co.uk

The NHS Choice Exercise is here if you are intending on retiring between 1st October and the 31st December. All others over the age of 50 as at the 1st October 2009 will receive their Choice Pack in 2010.

Every member of the Old or 1995 Section will be given the option of making a one-way switch to the New or 2008 Section. Once you have decided to switch you cannot reverse the decision and all service will be transferred accordingly.

If you joined the NHS Pension before the 1st April 2008, you will currently be a member of the 1995 Section with a Normal Retirement Age of 60, an automatic entitlement to a pension of 1.4% of you Total Pensionable Pay and a one off lump sum of three times the pension.

The 2008 Section has a Normal Retirement Age of 65, a higher accrual rate of 1.87% but no automatic entitlement to a lump sum, although income can be commuted at a ratio of £1 for £12 of lump sum.

If you are under 50 on the 1st October 2009 you will receive your pack in 2011 although regardless of timing, the choice you make will be backdated to the 1st April 2008.

Other Issues

There are other aspects of the 2008 Section which could be advantageous to members. These are:

• it offers more flexibility in your choice between tax free cash and pension
• it gives more flexibility in allowing you to take some benefits whilst still working and building up pension
• it could deliver higher benefits if you were to retire in serious ill-health
• it offers higher partners pensions to members who joined before 1988 and have a long term partner other than a wife

There are also aspects that could be detrimental and perhaps the most important of all is the age at which you plan to retire. Your benefits in the 1995 Section are paid unreduced from age 60. This applies both to the benefits you have already built up and those you build up in the future. If you transfer benefits to the 2008 Section and still retire at 60, and take the same lump sum as in the 1995 Section, your pension could be almost a quarter lower. So those retiring at 60 may not benefit from transferring.

In order to make a choice it is important you understand the implications of each option and ensure your individual circumstances are taken into account.

GP locums: meet your financial advisor before you meet your maker

If you’re a locum it’s unlikely you’ll be lucky enough (!) to benefit from any Death In Service Benefits, so you’ll no doubt want to take out a life insurance/assurance policy to cover the deficit. We’ve written an article on this for our members that illustrates the potential huge shortfall that our families could face if we choose to go to the happy hunting ground on the wrong day of the week.

BMA issues further guidance on death-in-service

There’s still life in ‘Death in Service’

Death in Service benefit can apply to GP locums

There seems to be a leedle bit of confusion over the perceived lack of ‘death in service’ benefits for GP locums. The BMA has recently flagged this up as an issue apparently because on the flu pandemic – something that leaves us here at NASGP a little confused, but I’m sure there’s a good reason somewhere.

Hopefully, we can clarify the situation for you thanks to our friends at the NHSBSA.

Freelance GP locums doget death cover from the NHSPS, even though they may not be tied to a particular PCT/LHB. If [a locum] were contracted to work at a GP Practice as a freelance GP Locum from Monday to Friday however died on the Wednesday you (or rather your family) would get the full death in service benefits; i.e. the same as a GP Provider would. This includes a death gratuity which would be based on twice your average uprated (dynamised) GP Locum pensionable income. A widow’s pension and child allowance may also be payable.

If, however you died on the Saturday (i.e. between jobs) you would fall under ‘the death within 12 months of last pensionable job’ rule. You (or rather your family) would get slightly different death in service benefits. This includes a death gratuity which would be based on three times the value of your accrued annual pension. A widow’s pension and child allowance may also be payable.

Like pretty much any freelancer, we’re not covered by a corporate injury scheme (in our case, the NHS Injury Benefits Scheme which can also pay out a death in service benefit). So, for that, the BMA’s interim advice does apply.