Hospitals consider paying doctors through personal service companies so as not to exceed pension cap.
Some NHS hospital trusts are considering paying their consultant clinicians via limited liability partnerships (LLPs), as problems have arisen for high-earning clinicians who have built up substantial contributions to the NHS's pension scheme. The 'tapered annual allowance' rules introduced in April 2016 reduce the usual GBP40,000 annual pension contribution allowance by 50p for every pound earned above an annual income of GBP150,000. Those making contributions above the allowed amount have to pay an annual charge of up to 45 per cent, and this is said to have induced many consultants to avoid overtime work.
The LLP arrangement is described in a briefing from NHS Providers, an umbrella organisation for NHS employers. Senior doctors would join partnerships that would receive payments for services above and beyond their normal NHS contracts. The payments into the LLPs would not be subject to the usual NHS pension contributions, so that the clinicians could avoid or at least reduce the contribution overpayment penalties.
A handful of NHS trusts have already explored the potential to pay for services from consultants who have formed an LLP, and some have taken matters into their own hands and implemented such arrangements, according to NHS Providers.
However, the arrangement may fall foul of the IR35 rules on payment through personal service companies, which are also being tightened up, with major changes coming in April 2020. Most trusts are thus waiting for the government to come up with a satisfactory alternative solution.
George Bull of accountancy firm RSM UK suggests that the annual allowance taper should be abolished for everybody. 'The value of pensions tax reliefs is already curtailed by the lifetime limit, so there is a compelling argument that the only impact of the annual allowance taper is to reduce the rate at which the individual reaches the lifetime limit', remarked Bull. 'This would cost the Treasury little or nothing in the long term, it would reduce the complexity of the tax system and it would remove this latest contributor to hospital waiting lists.'
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