By Simon Vincent, Senior Accountant

Ever had anyone tell you not to mix your drinks? You might get a headache, right? Well, if there’s a chance you might find yourself running a mixed NHS and private practice, you should know it’s the same as with drinking.

If you are wisely operating your private practice through a limited company, then the problem for HMRC is that your mixed practice is not one business. So while you may be using the same building, the same equipment, the same staff and drinking the same coffee in between NHS and private patients, on paper you’re not. You’d better make sure you know which business that coffee bean was allocated to or you could be in trouble.

OK, so HMRC might not ask about each individual coffee bean, but they will want to know which business bought the bag. For accounting purposes you really are running two businesses: a sole-trade or partnership containing the NHS bit and a limited company for the private patients (generally you can’t acquire an NHS contract with a limited company).

Not keeping things separate could have unpleasant tax consequences and could ultimately put you in breach of your NHS contract. Having fun at the back? Don’t despair though; here are three pointers to stay safe:

Put income into the correct bank account

Nice and easy for your monthly payment from the NHS, but what about card and cash takings? Your practice should be running front-desk software that allows you to tag and bag NHS and private income separately.

Deal with the costs nightmare early

The more you think about how this might work the more difficult it gets. Do you need to pay your staff twice each month? Run two supplier accounts? We’ve heard accountants suggest loading expenses to the NHS business (to reduce profit) but, actually, there could be a missed opportunity there. If expenses are loaded to the limited company it is commercial to then make a re-charge (with a profit margin) to the NHS business, thus shifting more profit into the limited company…

Think about your tax strategy

Clearly, your overall tax strategy needs to be considered, and the earlier the better. It may actually be possible to transfer the NHS income in its entirety to your limited company, although this requires bespoke consideration.

And if you have a mixed practice which isn’t yet using a limited company for any element then you really could be missing out.

Simon

Why not get in touch to discuss the best options for your business? Call us on  01872 300232 or email us at hello@hivebusiness.co.uk.