Colm Burke (Cork North Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

A large number of GPs have contacted me on this issue and I have met some of them. What normally happens with GPs in the general medical scheme, GMS, who are in a partnership practice is that the money comes into the practice, it is lodged into the practice account and GPs pay tax on the basis of the salary drawn from the practice. That is under strict guidance of the accountancy practice which has been in place for a long number of years. My understanding is that Revenue has decided that for any GP in the GMS, the income they get under the scheme will be taxed and they will be treated as individuals rather than being members of a practice. This is causing serious problems.

Some GPs aged over 60 have indicated that they do not want this new process in place and are planning to take early retirement. We already have a challenge in getting GPs in many rural areas. Those who are retiring are not being replaced. This is now a disincentive for people to stay in the GMS. Some will withdraw from the GMS or possibly retire as GPs completely. One GP who is in a partnership involving two people summed it up for me. He does 70% of the work on the GMS. Therefore, 70% of the income that comes in for him is under the GMS. His partner only does about 30% under the GMS and the remaining 70% of the work that person does is through private practice. Therefore, he will now get a larger tax liability because of the new Revenue system compared with his partner. This system will not work.

We need to remember that money that comes in under the GMS goes towards running practices and paying salaries. It also covers some of the enormous costs in practices, such as building insurance, professional indemnity insurance, heating, lighting and all of the things that are needed in a practice. All the money that comes in under the GMS goes into a central account. That account is used to pay the expenses of the practice as well as paying the salaries.

I am calling for engagement with the Revenue Commissioners in dealing with this. I understand this may require a change in the one of the Tax Acts in order to accommodate Revenue's concerns. I believe that this needs to be done immediately. GPs are really concerned. The accountancy bodies have identified that up to 91% of GPs will be affected directly as a result of this decision. Those 91% of GPs are in some kind of a partnership where there is a clear set of rules as regards the payment of salaries and also, as a result, the payment of tax. This will now be totally changed and they are not in a position to be able to work under this particular change.

Seán Fleming (Laois-Offaly, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I am taking this matter on behalf of my colleague, the Minister for Finance, Deputy Michael McGrath. The Department of Finance and Revenue have for some time been aware of issues arising from contractual arrangements with the GP community whereby some GPs treat income under the GMS contract as income of a practice in which they are a partner or an employee, rather than income of that individual GP. Revenue issued guidance, a tax note, to tax practitioners through the tax administration liaison committee in July clarifying the correct treatment of GMS income under tax legislation. To allow GPs and practices time to make any necessary adjustments to their arrangements to ensure compliance with the applicable tax code and legislation, the guidance confirms that the transitional arrangements will be in place until the end of 2023.

Revenue will soon publish supplementary guidance on this matter.

Although the guidance is being widely reported as a proposed tax change, it does not, in fact, introduce a change to the tax treatment of GPs. Instead it simply clarifies the existing legal and administrative position.

In accordance with section 58 of the Health Act, a GMS contract is between the HSE and an individual GP. The Department of Finance and Revenue understand that, as such, the HSE does not enter into GMS contracts with a medical practice, whether the practice is structured as a partnership or a company. This means that, as a matter of law, income under a GMS contract belongs to the GP who entered into the contract with the HSE. That position does not change because a GP treats GMS income as the income of a medical practice. This legal position was confirmed in a recent Tax Appeals Commission determination in January 2022.

A GP who holds a GMS contract is, under tax legislation, a chargeable person as regards income arising under the GMS contract and should report that income under the self-assessment system. The GP is entitled to claim a credit for professional services withholding tax deducted by the HSE on GMS payments. There is no legal basis to treat income arising from a GMS contract entered into between a GP and the HSE as if it were income arising under a contract between the HSE and the medical practice in which the GP is a partner or an employee. The approach taken to date has intended to ensure that the tax treatment of GMS income reflects the contractual position. In an effort to find a solution to this issue, discussions have taken place between officials in the Department of Finance, Revenue, the HSE and the Department of Health.

Earlier this week the Minister for Finance signalled his intention to table an amendment on Report Stage of the Finance (No. 2) Bill 2023 to provide that where individual GPs enter into contracts with the HSE to provide certain medical professional services and provide those services in the conduct of a partnership profession with other individual GPs, the income from those professional services can be treated for income tax purposes to be that of the partnership.

It should be noted that because there are a number of business arrangements and models in the GP sector, including partnerships, companies, employees and employers, the proposed amendment would resolve some but not all of the issues arising. There may, however, be scope for the Department of Health and the HSE to examine the issue from a contractual viewpoint as part of their ongoing strategic review of general practice.

Colm Burke (Cork North Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I welcome the second-last paragraph of the Minister of State's reply, which states that the Minister intends to bring forward an amendment on Report Stage of the Finance (No. 2) Bill 2023. The problem is that all the GPs who signed the contract understood that when they got income under the GMS scheme, it could go into the partnership account. The practitioners are not looking for such income, once it goes into a partnership account, to be treated as company income because of the far lower rate of tax on company income. That is not what is suggested. What they are looking for is that the system that was in place for many years continues. If the legislation needs amending, that would be welcome. GPs want to be entitled to lodge the income they get under the GMS scheme into partnership accounts in order that genuine expenses they incur in running their practices can be paid for out of those accounts.

In fairness to GPs, there is full accountability on the part of all of them as regards compliance with income tax and all the other regulations, whether PRSI, PAYE or whatever else. The important thing now, however, is that they are not penalised for being part of the GMS scheme. That seems to be the message that is going out - that once you are in a GMS scheme you will be penalised and you must pay tax as if all the money coming in is for your benefit, when in most cases it goes into the partnership, paying for the salaries and the other expenses that are incurred in the running of the practice.

It is important that this is brought forward at the earliest possible date in order that we do not have people resigning out of the GMS scheme and do not have doctors retiring three or four years earlier than they should be. Everything must be done to keep the maximum number of GPs in the system. It should be remembered that we have had a 40% increase in population in the past 23 years. We do not have the same increase in the number of GPs. It is therefore important we keep every one of them in every way possible and make sure we do not penalise them for doing their work.

Seán Fleming (Laois-Offaly, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

As I outlined, the Minister for Finance intends to bring forward an amendment on Report Stage of the Finance (No. 2) Bill 2023 to provide that where an individual GP enters into a contract with the HSE to provide certain medical professional services and provide those services in the conduct of a partnership profession with other individual GPs, the income from those professional services can be treated for income tax purposes to be that of the partnership. I think that is the substance of what Deputy Burke is referring to. That deals with those who are in a partnership.

The core of the issue is a contractual one. The current GMS contract dates back to 1989 and was developed at a time when a significantly large number of GPs functioned as individual practitioners in single-handed practices. Since then, general practice has evolved and a majority of GPs now provide services in the context of a group practice, which is normally established by a partnership. The Minister for Health has confirmed that the strategic review of general practice now under way will examine the current contractual arrangements for the GMS as well as other issues and will propose measures necessary to modernise the contract. In the interim, officials from the Department of Finance, Revenue, the HSE and the Department of Health will continue to examine the matter. It is complex, with no easy, one-size-fits-all solution, as there are a number of business arrangements and models in the GP sector. Revenue is allowing for a transitional period up to 31 December 2023 to assist GPs and medical practices to comply with their obligations under tax law. Further guidance will be issued to assist GPs in applying the correct tax treatment in respect of their GMS income. The Minister for Finance will provide further detail on the matter when he introduces the Report Stage amendment.

Deputy Burke can see from the response that the issue of those who are in a partnership is far more straightforward than where this is done by way of company arrangement. The Minister is dealing with as much as he can at the moment and will have further details when it comes to Report Stage of the Finance (No. 2) Bill.