Are Limited Companies the right commercial vehicle for GP contracts?

Limited liability companies are useful but are not always the correct way to run a business. They bring protection through reducing an individual’s exposure to personal financial risk should a business fail. They are often perceived as being a good way of reducing tax but recent changes in taxation mean that in reality there is very little difference in the overall tax paid through operating via a company route when compared with a partnership. In some scenario’s you can end up paying more to HMRC by trading through a company.

For GMS and PMS contracts, the partnership model is still favoured and for good reason. Partnerships are flexible allowing people to come and go, changes in profit shares to be applied and are simple to run. NHS contracts under GMS and PMS restrict how companies can be used – for example, you cannot subcontract work to a company owned by one of the contract holders.

For other types of contracts such as APMS or Primary Care Networks in England, companies may have some commercial merit. APMS contracts are time-limited and so there is more contractual risk at the end of the contract. PCN’s have been designed in a way that makes VAT and employment an issue – a limited company may well be the solution to these problems.

It is worth stressing that a limited company does not reduce the risk from medical negligence as the risk remains with the practitioner in all cases.

Care does though need to be taken when considering using a limited company and you need to consider both the commercial and tax implications. Our video’s with Mills and Reeve on incorporation and PCN’s look at the areas to look at. Networks only apply to our English practices, but the incoporation issues cover all countries.

Written by Des Liddy, Healthcare Partner

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