Expertise that supports your practice. People who understand the care behind it.
We act for GP practices and individual doctors across Jersey. From the outside, practice finances look simple: fees come in, staff and premises are paid, and the partners share what is left. In reality, the accounts and tax sit on top of structures that are far from simple, and the gaps tend to show only when a partner joins or leaves, or when a tax assessment does not match what someone expected.
This article sets out where the complexity lies and how we deal with it for you.
Every practice structure works differently
Jersey practices are not all partnerships. Some operate as traditional partnerships, some as limited liability partnerships (LLPs) and others as limited companies. Each has its own legal framework and its own consequences for how profit is shared, how the doctors’ capital is held and how each doctor is taxed.
In a partnership or LLP, the profits are taxed in the hands of the partners. In a limited company, the company is taxed in its own right and the doctors, as directors and shareholders, are taxed on the salary and dividends they take, so how and when profit is drawn out needs planning.
We act for practices under each of these structures and understand the nuances of each, from how a partnership agreement deals with profit-sharing ratios and capital, to the steps involved when a partnership converts to an LLP. Where the practice premises or lease are held separately, for example through a company owned by the practice, that entity has to be accounted for alongside the practice itself.
What you are taxed on is not what you were paid
For partnerships and LLPs, a common misunderstanding is that the money paid into a partner’s bank account during the year is the figure to put on their tax return. It is not.
A partner, or LLP member, is taxed on their share of the practice’s tax-adjusted profit for the year. That figure starts with the profit in the practice accounts, which is then adjusted for tax: expenses that are not deductible are added back, capital allowances are given on equipment and fit-out, and any items that tax law treats differently are dealt with. The adjusted profit is then allocated between the partners under the profit-sharing arrangements in force during the year.
Drawings are simply cash taken on account of that profit. They may be higher or lower than a partner’s profit share, and they may include amounts the practice has paid on the partner’s behalf, such as income tax or social security. A partner who declares their drawings rather than their tax-adjusted profit share will almost always have the wrong figure on their return, sometimes too high and sometimes too low.
We prepare the tax computation for the practice and give each partner the figure to declare, so that the practice accounts and every partner’s return agree.
Allowable expenses: getting the detail right
An expense is deductible where it is incurred wholly and exclusively for the purposes of the practice. For a medical practice this typically includes:
- staff costs, locum cover and practice management
- premises costs: rent, rates, utilities, cleaning, repairs and insurance
- medical consumables and clinical waste
- IT systems, clinical software and telephony
- accountancy, legal and professional fees
Some costs are paid by doctors personally rather than through the practice, such as professional registration, medical indemnity, professional subscriptions, courses and continuing professional development, and use of a car for practice work. Where these relate to the practice they can be claimed, but they have to be captured and brought into the computation properly. If they are missed, the partner pays more tax than necessary.
Other costs are not deductible, or are treated differently:
- equipment, refurbishment and building works are capital items, relieved through capital allowances where available rather than as an expense
- costs with a private element need to be apportioned
- partners’ own income tax is not a practice expense, even when the practice pays it on their behalf, and partners’ social security contributions need careful treatment
Keeping things fair between partners
Many practices pay income tax and social security on behalf of their partners. Over time, those payments can drift out of line with what each partner actually owes. A partner may join part way through the year, some partners may have employment elsewhere on which social security is already paid, or profit shares may change. Unless this is tracked, partners’ capital accounts stop reflecting what each partner is really owed.
We reconcile these positions each year. Where differences have built up over several years, we help partners put them right through a single equalisation exercise, set out clearly enough for every partner to follow.
Joining, leaving or restructuring a practiceJoining, leaving or restructuring a practice
Changes in a partnership are where good advice makes the biggest difference.
- Buying in: agreeing the value of goodwill and any share in premises, preparing completion accounts at the date of admission, and setting up the new partner’s capital account.
- Retiring or leaving: settling the outgoing partner’s capital account, dealing with their final profit share and planning the tax position on exit.
- Changing structure: converting a partnership to an LLP, including the agreement, the transfer of the business and the accounting on day one.
We help practices plan these changes ahead of time, so the numbers are clear for everyone before anything is signed.
Complex tax matters, dealt with on your behalf
Many doctors have more than one source of income: a practice profit share, a hospital or other salaried role taxed through ITIS, private sessions, out-of-hours work with JDOC, teaching, and sometimes rental or investment income. Each is taxed differently, and all of it has to be brought together correctly.
We prepare and file your personal tax return, check your assessment when it arrives, and deal with Revenue Jersey for you, including correspondence, enquiries and objecting to an assessment that is wrong. We also make sure your tax instalments reflect what you actually expect to owe, so there are no surprises.
A finance function for the practice
Alongside the year-end accounts and tax, we can support the practice through the year:
- payroll for the practice team through ITIS
- bookkeeping that keeps records clean and submissions on time
- management accounts, so partners can see how the practice is performing during the year
- cash flow forecasting and budgeting, whether for a new hire, a new partner or larger premises
Moving to Jersey as a doctor
If you are relocating to the island, the first year matters on both sides. In Jersey, your tax affairs need setting up correctly from the start. In the UK, there is your final UK tax return, the date you cease to be UK resident, any UK income in the year you move and your NHS pension to consider.
If you keep a property in the UK, for example letting out your former home, you will normally still need to file a UK Self Assessment tax return each year after you move, as UK rental income remains taxable in the UK. We can prepare and file your UK return for you, or work alongside your existing UK advisers so that your UK and Jersey positions are dealt with consistently.
If you have been accepted for a position here, the Government of Jersey can in some cases offer support with relocation costs. We regularly support clients with their move. For more on how we help, see our relocation services.
How BestwickRussell works with medical professionalsHow BestwickRussell works with medical professionals
We look after GP practices and doctors across Jersey, operating under each of the structures above, so this is familiar ground. You will deal mainly with me, Greg Bestwick, or with a senior colleague who understands how medical practices on the island work. I have worked with a number of practices, alongside the bodies that represent Jersey’s doctors, and with the Government of Jersey.
Key points
- Jersey practices operate as partnerships, LLPs or limited companies, and each structure has its own accounting and tax consequences.
- Partners are taxed on their share of the practice’s tax-adjusted profit, not on the drawings paid into their account.
- Expenses paid personally by doctors can often be claimed, but only if they are brought into the computation properly.
- Tax and social security paid on partners’ behalf need reconciling, or capital accounts drift out of line.
- Changes to a partnership are the best time to take advice, ideally before anything is agreed.
Thinking about your practice finances, or your own? Start with a conversation.
