Medical accounting expert Philip Redhead highlights two important topics for accountants with GP clients.
In this article I’d like to bring your attention to two topical matters regarding GP pensions’ excess annual allowance tax charges on their pension contributions, and ensuring that any GP pension certificates are filed in time to prevent any delays in your clients receiving their tax relief.
Excess pension input tax charges funded by NHS
In an earlier article I wrote about the issues relating to excess pension input charges on GP pension contributions and how unfair this was to clinicians who have little control over the contributions they are obliged to pay into their pension schemes (Accounting Practice, Summer 2020).
These contributions have been increasing significantly over the years and in a sizeable proportion of cases involving senior clinicians have resulted in large excess pension input tax charges on the general practitioners and consultants, etc. These tax charges often hit unexpectedly and rather painfully on client’s wallets.
These tax charges resulted in many clinicians leaving the NHS pension scheme, leaving the NHS completely or refusing to work additional sessions as the additional pension contributions and tax charges often resulted in the clinicians losing money when working harder.
There has been much about this in the press and eventually the NHS bowed to the increasing body of pressure and agreed to fund these tax charges for affected pension scheme members.
The mechanics on how to claim this funding has recently been announced and involves the following steps:
- Where any excess pension input charges have been identified and included on GPS personal income tax returns, you need to have ticked the box saying that the tax will be paid through a scheme pays election. This is an election where the tax due is paid directly by the NHS out of your client’s pension funds.
- An application for ‘Scheme Pays Election (SPE2)’ also needs to be completed and filed with NHSBSA. The deadline for filing this election is 31st of July in the year following the tax year of the annual allowance tax charge.
- To compensate general practitioners for their loss of benefits on retirement due to this payment out of their pension funds you can now complete 2019/20 annual allowance charge compensatory policy application forms for your clients. This can be found at https://tinyurl.com/3guw6as2
When this has been filed and approved the NHS guarantees to ensure that the members benefit, on retirement are uplifted to cover any shortfall due to the amounts paid to HMRC to settle the excess pension import charges.
GP and non GP certificates of pensionable income
As a further reminder I would also mention that your GP pension certificates need to have been filed with the NHBSA before the end of February so that these are processed in time for any end of year adjustments to be deducted from surgery NHS income before 5 April 2021. If the NHS have not deducted this by then, the tax relief on these pension contributions will be delayed for an additional 12 months.
• Philip Redhead is MD at Accounts Action (S.E.), based in Kent. He can be contacted on 01883 732203/732204 or at firstname.lastname@example.org