This column often talks about private practice for hospital doctors but rarely those working privately in a primary care setting. Alec James puts that to rights.
With a growing demand for private GP appointments, I have been asked to provide some of my top tips for those who are either already working as a private GP or considering the move.
Consider your trading structure
This is one of the most important decisions to make financially.
If you are working independently, you will generally have the options of trading via a limited company or working on a self-employed basis.
A limited company limits your personal liability exposure and can offer some tax advantages, particularly if you have other sources of income such as a salaried role, but is a lot more involved in terms of compliance.
Working on a self-employed basis can often be the simplest model.
If you are working collectively with other private GPs, you can either work as a partnership or have a jointly-owned limited company.
A limited company may offer tax advantages for the doctors and it limits your personal liabilities. However, there may be differing financial motives of each doctor.
A company with higher reserves – profits which have not been distributed to the shareholders – can also lead to issues if there are changes to the doctors’ working patterns or where there are incoming or exiting doctors.
A limited liability partnership (LLP) can offer an alternative solution with the flexibilities of a partnership but offering a level of liability protection to the partners.
These discussions should always be held with a specialist medical accountant, as there is not a one-size-fits-all solution.
Face-to-face or virtual appointments
In an increasingly virtual world, you need to consider if your private GP services will be available virtually, face to face or a mixture of the two.
Generally speaking, virtual appointments have the lowest set-up and ongoing costs for the doctor, as these costs will be primarily in relation to IT equipment. However, online services generally attract a lower fee from patients for providing the services.
If you are planning to offer face- to-face appointments, these generally attract a higher fee, but depending on where you provide the services, could attract significant set-up and ongoing costs.
Rented rooms in an already established private medical setting will have the lowest initial start-up costs, as the rooms are likely to contain the majority of the equipment you need to provide consultations.
As your practice grows, you may find that you need your own premises. This will often have the largest upfront costs and also has additional compliance requirements such as Care Quality Commission registration, but can allow your clinic to grow.
As a private GP, you need to consider your pricing model.
For those working with an established provider, you will need to negotiate your hourly or sessional rate. For those establishing their own practice, you will need to decide your pricing model. This could be a ‘pay as you go’ or monthly fee model.
An inclusive monthly fee can offer the most financial security in that you will receive a fixed amount per month for each patient registered.
However, there may be ‘winners and losers’ in this model, in that you receive a fixed amount despite the number of appointments offered.
Alternatively, a pay-as-you-go model means you only invoice for the work you have done.
You could also consider a hybrid model where a monthly fee offers a discount against your usual pay-as-you-go rates.
You will also need to decide on charges for other services such as vaccinations and blood tests.
When first starting out, a cash-flow forecast modelling different pricing structures can help you find the right model for you.
Whether you are working with an established provider or operate your own practice, you will need to make sure you regularly review your fees to ensure you are keeping up with inflation.
Another consideration is your future exit strategy because, unlike with NHS patients, a GP practice with private patients can be sold. If you have a consistent and predicable income stream, this will stand you in good stead for maximising the value of your business in the future.
When patients are registered to your practice, you will need to ensure you have a contract in place with each patient. This will specify the terms of engagement. It should cover things such as the number of appointments your patients are entitled to in a specified period.
If working collaboratively, a partnership agreement or shareholders agreement is extremely important, as this ensures all parties understand their responsibilities and obligations to the practice.
Having these drafted and reviewed regularly by a solicitor who is specialised in private GP practices will ensure all the important points are covered.
Make sure you are covered
Within the NHS, the majority of your work is covered by the Government-backed indemnity scheme. This does not apply to your private earnings. You should therefore ensure that your private earnings are indemnified.
As a business, you will also need to consider if you have any other areas which may need to be covered. This could include public liability insurance, data protection and, if you employ staff, employer liability insurance.
Your business will need to maintain accurate financial records. There are specific clinical software systems which are primarily used by private GPs.
In addition to these, financial book-keeping software will help you keep track of your business’s finances.
Annual accounts will also be needed. While these are required to ensure your business pays the correct tax, detailed accounts are also a valuable tool to help identify profitable parts of your business and areas you can financially improve your practice.
When considering starting or expanding a practice, it is likely you will also need to prepare financial forecasts to help you ensure your plans will be a financial success.
These would factor in potential pricing structures, expected patient numbers, set-up and ongoing costs. The forecasts should consider both the profitability and the cash flows of the practice.
Both of these documents will be essential if you seek external finance.
Appointing a specialist medical accountant can give you a more detailed insight into where improvements could be made to your business.
Working privately means you will not have access to the NHS pension scheme on these earnings. With this in mind, you will need to consider your retirement planning, particularly if growing your private earnings leads to a reduction in your NHS income.
Depending on your trading structure, your business may be in a position to pay a pension contribution on your behalf.
Alternatively, you may wish to make personal pension contributions which may attract tax relief on your self-assessment tax return.
From April 2023, the pension savings annual allowance has been increased up to a maximum of £60,000 – depending on your individual tax position.
It is always worth discussing retirement planning with an independent financial adviser to ensure the planning you are doing is the most efficient.
Building your team
As your practice grows, it is likely that you will need to involve either other GPs, healthcare professionals or administrative/management support.
The team you pick can impact the success of your practice and can have different financial implications.
Depending on the person you are working with, they are likely to be:
Employed by an external provider;
Work on a self-employed basis or via a limited company;
Employed by your business.
When using staff charged by another provider or self-employed workers, you will be billed monthly for the hours/days the person 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.
Workers 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.
If you are regularly working with someone under your supervision, you may need to consider HM Revenue and Customs’ (HMRC’s) ‘off-payroll working’ rules and consider whether they need to be paid via a PAYE scheme.
As your practice grows, it is likely that you will need a team that works exclusively for your business. These are more than likely to be considered as employees.
Your employees will be entitled to employment rights such as paid sick leave, holiday pay and parental leave. Your business will have PAYE obligations and you will need to deduct tax and National Insurance from their salary and pay these over to HMRC.
You will also be required to pay employers’ National Insurance and pension contributions. These are often referred to as ‘on costs’.
As the staff you will be working with have the opportunity to work in the NHS and have access to the NHS Pension Scheme, these employees often demand a higher salary than they would receive in the NHS to compensate for the loss in access to the NHS pension scheme.
It is always advisable discussing the potential employment 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.
Generally speaking, healthcare services provided by a GP provider, whether it is in an NHS or private setting, will be exempt from VAT. There is a specific VAT notice which covers healthcare. In order to be exempt from VAT, the work needs to satisfy two conditions:
- The services are within the profession in which you are registered to practise;
- The primary purpose of the services is the protection, maintenance or restoration of the health of the person concerned.
In instances where both conditions are not met, the supply is likely to be VAT-able. However, it is only if these VAT-able supplies exceed the registration threshold – currently £85,000 – that you would need to register and charge VAT.
For those providing GP services to an established provider, particularly via a limited company, your VAT status needs to be carefully considered.
Working in the private setting of general practice can be an exciting move and very profitable. Hopefully, the above tips will help you consider your obligations when starting or growing your practice.
Alec James (right) is a partner at Sandison Easson & Co, specialist medical accountants