GP partner becoming a locum – the tax and financial implications

28th June 2013 by Liz Densley

GP partner becoming a locum – the tax and financial implications

In recent times we have seen more partners deciding that the pressures of partnership are too much and preferring a theoretically more relaxed career as a locum. Whether that is the case is beyond this article, but I’ll just set out some of the tax and financial implications for those considering a move.

Income tax ‘time bomb’ on leaving a partnership: if your practice draws its accounts up to any time other than 31st March each year, there is likely to be a ‘catch-up’ charge when you leave the practice. You may also have a similar additional charge for superannuation. An example is the best way to explain this.

  • Joined a practice 01-04-1998, with a June year end, earning £48,000 a year.
  • For 1998-99 you would have been taxable on income earned for the 12 months to 31-03-99
  • For 1999-00 you would have been taxed on 12 months to 30 June 2000
  • So the period between 01-06-98 and 31-03-99 will have been taxed twice.
  • This will give you 9 months overlap of £36,000
  • Leave the practice 31-03-13 when profits are running at £120,000 a year.
  • For 2012-13 you will be taxed on the 12 months to 30-06-12 (£120k) PLUS 9 months to 31-03-13 (say £90k) LESS overlap of £36k as calculated above – which totals £174k – rather more than you might have expected.

If you have been reducing sessions in practice prior to leaving, you can also have an unexpected restriction of seniority payments in your final year because a similar overlap situation arises for pension contributions – you should confirm the situation with your accountant before committing yourself to a firm retirement date.

Claiming expenses:

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