Jackie Cahill (Tipperary, Fianna Fail)
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107. To ask the Minister for Finance the reason the Revenue Commissioners plan to prohibit GMS income being mandated to partnerships or employers, and instead each GMS list holder will have to declare such income in their annual income individually as GPs; the rationale behind this decision; and if he will make a statement on the matter. [45441/23]

Michael McGrath (Cork South Central, Fianna Fail)
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I propose to take Questions Nos. 106 and 107 together.

My Department and Revenue have, for some time, been aware of issues arising from contractual arrangements within the General Practitioner (GP) community whereby some GPs assign income under their General Medical Services (GMS) contract to a GP practice in which they are a partner or an employee. The income is then treated by the parties as if it were income of the practice for tax purposes rather than income of the GP.

Revenue issued a guidance note to tax practitioners through the Tax Administration Liaison Committee (TALC) in July of this year clarifying the correct tax treatment of GMS income under tax legislation. That guidance confirmed there would be a transitional period for compliance with existing tax law, until 1 January 2024. Revenue will soon publish supplementary guidance on this matter. Although the guidance is being widely reported as a proposed tax change, I would note that 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 58C of the Health Act, a GMS contract is between the HSE and an individual GP. My Department 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 mandates the payment of GMS income to a medical practice. This legal position was confirmed in a recent Tax Appeals Commission (TAC) determination issued in January 2022 (01TACD2022).

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 under 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 being taken is intended to ensure that the tax treatment of GMS income reflects the contractual position.

My Department has not undertaken consultations with GPs on this issue, however, as previously indicated, Revenue have been advised on the matter by tax practitioners through the Tax Administration Liaison Committee. In an effort to find a solution to this issue, discussions have taken place between officials in my Department, Revenue, the HSE and the Department of Health. Although my Department and Revenue are conscious of the difficulties being experienced by GP practices, they must be cognisant of existing legislation. Furthermore, it would not be appropriate to make changes to tax legislation to accommodate contracts and practices of a particular sector of the economy where they can be changed by the agreement of the participants.

Given the core issue concerns the contractual arrangements involving GPs, there may be scope for the Department of Health and the HSE to examine the issue from a contractual viewpoint.

As it currently stands, the relevant tax policy and legislation remain unchanged, however, to assist GPs and medical practices in complying with their obligations under existing tax law, Revenue is allowing a transitional period to 1 January 2024 and is preparing further guidance to assist GPs in applying the correct tax treatment in respect of their GMS income.