The client
A GP partner received an unexpectedly large tax bill. With his own accountant unable to provide an explanation, he turned to the specialist medical accountancy firm in Manchester appointed by the practice.
The dilemma
Wanting to save money, the doctor used a sole trader, non-specialist accountant to prepare his personal tax return. Due to errors made by the accountant the doctor received a tax bill of £90,000 to pay by 31 January 2025.
A relatively new partner in the practice, the GP was looking at paying out most of his income in tax. He consequently approached the practice accountants, AISMA firm Forvis Mazars, for help.
‘The GP knew me from when I looked after the partnership accounts at his previous practice,’ said Kieran Hancock, healthcare director at Forvis Mazars. ‘This meant I already had some knowledge of his financial circumstances.’
‘I asked him to send me the tax calculations prepared by the non-specialist accountant so I could find out what had gone wrong.’
Action required
Close inspection of the tax calculations identified three main issues.
The first was the partnership profit figure used in the GP’s tax return. ‘The non-specialist accountant had simply lifted the figure from the partnership accounts, whereas the correct figure to use is the one that goes through the partnership tax return,’ said Kieran Hancock. ‘This is a red flag issue because the number is not usually the same.’
He went on to explain that the profit figure from the practice accounts will not include adjustments for, among other things, capital allowances and any items not deductible for tax purposes such as depreciation, all of which would affect the amount of tax payable.
The next problem was that there had been no deduction for superannuation payments. ‘This is fundamental to the amount of tax a GP pays, since superannuation payments reduce taxable income and consequently the tax bill,’ explained Kieran Hancock. In this case there had been a spike in contributions due to administrative problems with PCSE. Superannuation payments totalling £90,000 covering a number of years were missing from the tax calculations.
Finally, no personal expenses had been claimed on the tax return and the loan interest on property the GP owned in his previous practice had not been deducted. Kieran Hancock said, ‘The interest payments were something the non-specialist accountant missed, simply because they didn’t understand the mechanics of GP property ownership.’
Conclusion
‘After highlighting what should have been deducted and correcting the GP’s tax return, we saved him £42,000 in tax on the January 2025 payment,’ said Kieran Hancock. ‘Needless to say, we have since become the GP’s tax advisor of choice.’
‘Much of this was down to our expert knowledge of how GP finances work and proves the value to both GPs and their practices of building a good working relationship with a specialist medical accountant.’