Written by: Lentells Accountants

It is becoming increasingly difficult for some GP practices to recruit new partners, due partly to the current national shortage.  In this article, we examine some of the financial detail to include in a contract offer to a new GP partner.

The main requirement of the financial offer should be based upon a route to a full parity profit share.  There are several factors to consider when setting the route, such as the practice’s usual offer for new partners, current practice profits compared to average figures, the experience and skill set of the new partner, their current salary and pay expectations, current market rates of pay, how vital it is for the practice to secure the services of the new partner, and whether the partner has had other job offers.

All of these factors will determine the prescribed route to full parity, which could be aligned with the completion of their mutual assessment period.  Due to the current shortage in GPs, and depending on the new partner, some practices do offer a full parity profit share from when they first join.

The practice would need to provide the new partner with an anticipated level of monthly drawings.  This should be either calculated based on the latest set of practice annual accounts, or from an accurate profit forecast for the current financial year.

Drawings will either be calculated before or after tax savings depending on who pays the tax liabilities.  Detailed calculations may need to be undertaken to split the payment of the first year’s tax liability for the new partner, if, for example, they commenced with the practice part-way through a tax year.  If the new partner has significant outside practice income, they may need to pay the tax on this personally, or if the practice pays the full liability, drawings would need to be reduced to account for the additional tax that may be due.  If the new partner has outstanding student loans, these may still need to be paid personally.

The payment of the new partner’s professional subscription fees, such as their medical indemnity and GMC premiums could form part of the financial offer, if the practice currently pays for the existing partners’ fees.

The practice will need to decide how the new partner will build up their working capital requirement.  This could be a one-off payment into the practice on completion of their mutual assessment period, or through a reduction in monthly drawings over a set period.

In terms of property capital, if the practice owns the surgery premises, the offer should detail when the new partner will be expected to buy in and also the expected capital requirement.

Once both the financial and non-financial terms have been agreed with the new partner, the updated partnership agreement should be signed upon joining the practice.

Author: Ed Paull, Director Lentells Accountants, Medical Division. Ed deals with all areas of the GP contract, including related taxation and NHS pension issues.