As your private practice grows, you will need to build a team to support you. This may be a secretary or administrative support or another healthcare professional.
Unlike your work in the NHS, where these resources are likely to be already available, you will need to build your own team. The team you pick can impact the success of your private practice and can have different financial implications, says accountant Alec James.
A medical secretary will likely be your first – and possibly the most important – role you recruit for. Your secretary will often be your patients’ first point of contact as they look to arrange an appointment with you.
Medical secretaries are usually either:
Employed by the private hospital where you work;
Work on a self-employed basis or via a limited company;
Employed by your business.
In most cases, secretaries are employed by the private hospital or the secretary is self-employed.
You will be billed monthly for the hours/days the secretary has supplied or, occasionally, a percentage of your fees.
You should be provided with an invoice detailing the hours they have worked for you and then the amount. For accounting purposes, you should keep either a physical or electronic copy for seven financial years.
No employment rights
Secretaries paid in this way have no employment rights from your business. This means that if they are sick or on annual leave, they should not be paid or alternatively a replacement should be provided to you.
Secretaries working in this way will often be working for a number of consultants.
As your private practice grows, it may be that you find you require a secretary that works exclusively for your business. Where someone is working exclusively for you, it is likely that HM Revenue and Customs (HMRC) would class them as an employee rather than someone who is self-employed.
This status is not a choice, but a question of fact. To help you determine the status, there is a toolkit available on the HMRC website.
As an employee, your secretary will be entitled to employment rights such as paid sick leave, holiday pay and parental leave.
That also means that your business will have PAYE obligations, meaning you will need to deduct tax and National Insurance (NI) from their salary and pay these over to HMRC.
You will also be required to pay employers NI and pension contributions. These are often referred to as ‘on costs’.
For you to pay the tax and NI, you will need to register for a PAYE scheme for your business and report monthly to HMRC. You may also need to operate an employer pension scheme.
In addition to a basic salary, you may also choose to pay your secretary bonuses or commission or provide benefits to them such as private health insurance.
These extra payments are taxable and also need to be reported to HMRC. There are, however, certain benefits provided to employees which fall outside the scope of tax and NI.
It is always advisable discussing the potential employment of a secretary with an accountant so that you are aware of the total cost to your business prior to offering employment.
You should also seek the advice of an employment solicitor or HR specialist to have a contract of employment drawn up.
Other healthcare professionals
It may be that in certain cases you may need to involve another healthcare professional such as another consultant or a nurse.
When working with other healthcare professionals, it is important to establish who will be responsible for the procedure and how the parties involved will be paid.
Where you require the services of a nurse or another healthcare professional under your supervision, the arrangement will usually be on an ad-hoc basis and therefore they are likely to be paid as a self-employed person or through an agency.
If you are continually working with someone under your supervision, you may need to consider HMRC’s ‘off-payroll working’ rules and consider whether they need to be paid via a PAYE scheme.
When you work with other consultants, you need to think about where the responsibility lies and who has the relationship with the patient/insurer.
Each raise an invoice to the insurer/patient for your share of the fee;
Have one party invoicing for the full fee and paying the other party their share.
Financially, the end result is the same. However, if your business invoices for the full amount and then pays the other party, it could be exposed to potential liabilities because it has supplied the service of both clinicians.
In these cases, you should ensure you have suitable contracts of service in place with your colleague and discuss the arrangements with your indemnity provider to ensure you are suitably covered.
If you regularly work with a colleague, it may be worthwhile forming a joint, separate legal entity for this income.
As with many small businesses, the administrative duties of your business such as invoicing, bookkeeping, chasing outstanding debts and social media/website updates can often fall on your immediate family.
If this is the case, your business can employ them for the work that they do. This can often be tax advantageous where the employee does not have another job or is a lower-rate tax payer. Again, you may have to have to register a PAYE scheme for your business to pay your family members.
Using a PAYE scheme for family members can often be very tax-efficient. It can also help to fill in any gaps in a NI record which can, in turn, increase the state pension to which they are entitled.
In addition to the basic salary, you may also consider a pension scheme for your family member.
You need to think about the total remuneration package paid to any employee. This should reflect the work the employee does for your private practice. In the event of a HMRC inquiry, a record of hours worked and the work done will help support a claim.
Making them a director of your limited company – if applicable – can also help with your claim because additional duties arise from being an officer of a company.
If you have a limited company, you could be paid a salary. Historically, many consultants have chosen to not draw a salary from their company, instead choosing to receive dividends in their capacity as a shareholder.
With any rise in corporation tax and changes in NI thresholds, this is something you may wish to revisit, because it may be more tax-efficient to receive a salary.
In addition to a salary, there are other ways your company could remunerate you or your family members. This could include benefits in kind such as the company providing you the use of an electric car.
This is often very tax-efficient, as the company obtains the tax relief of the purchase or lease of the car together with the maintenance costs, while the tax implications on you, as director, are very minimal.
By using company funds in this way, there is normally a corporation tax saving and also a reduction in the amount of dividends you need to draw from the company, ultimately saving personal tax.
Medical billing company
You may wish to use a billing company to handle the invoicing side of your business. Some find this more comfortable because it takes away the need to discuss financial matters with patients and frees up time for your secretary.
A billing company will raise the invoices, collect payment and chase outstanding debts. For this service, it usually charges a percentage of the invoices raised or fees collected. These fees are tax-deductible.
It will also provide you with detailed reports showing the income generated and fees received, which can be used by your accountant when preparing your annual accounts.
Accountant and other professionals
While not members of your direct team, a private practice business will need some form of accounts to be drawn up in order that the relevant taxes are paid, so you will likely need an accountant.
Specialist medical accountants will be able to help you in other areas too, including discussing the tax implications of the above with you. They can also reduce your administrative burdens by providing payroll and book-keeping and advise about appropriate accounting software packages.
Solicitors, independent financial advisers (IFAs), human resource support and insurance specialists would also fall into the category of the indirect team and all of these professions can also be vital to help your business continue to be successful.
As you build your successful team, it is important your relationships with them are formalised to ensure the risk of getting things wrong is minimised.
As always, make sure you discuss your circumstances with a specialist medical accountant and make them aware of any new arrangements and opportunities that come along.
Alec James (right) is a partner with Sandison Easson specialist medical accountants