Tax bills on unspent Primary Care Network (PCN) funds

If you have any GP clients whose surgery is a member of a PCN that has not utilised all of its funding received you should make your client aware that HMRC will regard your client’s share of these unspent amounts as taxable income, writes Philip Redhead.

Primary Care Networks (PCNs) were introduced in 2019 and all GP surgeries are obliged to be a member of one. They are intended to receive funding for services that individual surgeries would find uneconomic to provide. These services are to be shared between the member surgeries and may include additional nursing staff, community prescribers and clinical pharmacists. It is understood that in future more and more of surgery funding will be directed through PCNs.

It has, however, come to light that many PCNs are holding large sums of unspent cash that will be treated as income of the member surgeries if it has not been spent, or if a legally binding arrangement, to spend it had not been entered into by 31 March 2020.

This is a surgery profit and will also need to be disclosed on your client’s surgery web site as part of partners net earnings.

As this is also ‘NHS pensionable income’ it may also result in higher than expected superannuation bills and have a knock-on effect with pension annual and lifetime charges.

The good news is that recruitment funding will not be included in these profits; however, all other funding streams will be included such as the ‘network participation payments’.

HMRC have commented that for any unspent amounts to be treated as relating to committed expenditure “your client needs to have committed legally or constructively to spending the funds, so for example putting in an order for something and getting an invoice”.

• Philip Redhead provides specialist tax advice and accounting services to doctors’ practices and other medical professionals, as well as dealing with clubs and associations. Call 07498 202406 or email him at philip.redhead@pjraccountancy.org

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