A group of NHS trusts have explored letting doctors set up their own companies as a workaround for consultants who have cut their additional hours to avoid being hit with “punitive” tax bills, HSJ has learned.
An NHS Providers briefing, seen by HSJ, said a “handful” have looked into paying consultants for services via limited liability partnerships, which could enable the senior clinicians to manage their pay and pension contributions more flexibly. The arrangement would allow senior doctors to work additional hours on top of the programmed activities they are contracted for and receive non-pensionable pay in return.
The government recently announced that it was embarking on fresh consultation into reforming pensions for senior clinicians. However, Neil Bhan, a partner at DAC Beachcroft told HSJ: “There are some trusts who have already taken matters into their own hands and they will need to decide [after the government publishes its guidance] whether they are going to come out of those new arrangements that they have implemented or not.”
The Department of Health and Social Care confirmed it will provide employers with guidance on how they can meet their staff’s needs without breaching the annual allowance limit. Options include recycling employer pension contributions into salary or offering locally-defined contribution pensions.
In the briefing to its members, NHS Providers said contribution recycling was one of three common approaches organisations were taking alongside increasing non-pensionable pay and reward and deferred additional leave. However, other options have also been considered.
It added: “A handful of trusts have explored the potential to pay for services from consultants who have formed an LLP, as they believe it allows for more flexibility for the staff in question to manage their pension savings.
“From our information, it appears that the LLP approach is not being widely considered as a solution at the current time. This may be due to compliance considerations around IR35 tax rules.”
Some trusts have also explored alternative programmes for staff who have opted out of the government’s own National Employment Savings Trust scheme. Employees who do not qualify for the NHS Pension Scheme could become a member of NEST, however, NHS Providers said the benefits were not comparable.
Miriam Deakin, the organisation’s director of policy and strategy, insisted trusts “overwhelmingly prefer” a national solution as there is an urgency not to see local arrangements as a long-term fix.
She said the government’s consultation needs to be completed quickly, before adding: “The fact is that staff are unlikely to stop reducing their hours, or [stop] refusing additional work, until we have a clear, definitive solution fully in place.”
HSJ approached both the DHSC and the Treasury for comment. In a joint statement, they said: “Employers are encouraged to consider all possible ways of providing their workforce with the right incentives to deliver the services patients need. However, they must comply with all relevant tax and employment law.”
How the LLP option could work
Consultants in an LLP would provide services to a trust and receive non-pensionable pay in exchange, HSJ understands. For example, they might work 50 additional hours per month to provide services in an area with a long waiting list and get paid a non-pensionable contribution.
There are several problems that employers are faced with. LLPs could become less attractive once the government’s unpublished guidance is enforced by April 2020, and DAC Beachcroft’s Mr Bhan said some organisations may feel it is too much of a risk until further details on the new government consultation are released.
A trust’s HR director told HSJ employers like themselves are forced to deal with their current problems while waiting for directions from ministers. They said their trust was being put under pressure “from all sides” and could have “major problems” with winter planning if nothing was done until Christmas.
Mr Bhan warned the government’s proposals could not be fully evaluated until more details emerged. He said: “The proposals are going to start in April 2020. That gives time for the consultation on the one hand, which is good. But on the other hand it means that, until April 2020, unless trusts take matters into their own hands and do something themselves, they are stuck with the current problem.”
Asked if the new announcement changed whether trusts would consider the LLP option, Mr Bhan believed it did. He added: “I doubt many trusts would go down that route unless they said to themselves, ‘We’re not expecting this [the government’s proposals] to work in the long run, therefore, we’ll take some alternative solutions.’
“’We’ll deal with it ourselves internally in the expectation that the government’s proposals will not be sufficient [enough] to deal with the problem.’”
He said trusts that had already acted may find it difficult to reverse changes made before the government guidance is published because, although their local solution may work better, they were not DHSC-approved.
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