GPs operating as a personal medical services (PMS) organisation could be facing a tax bill that is 13.8 per cent higher than normal under new legislation coming into force on April 6.

From then on HM Revenue & Customs (HMRC) will be cracking down on the partnership schemes of limited liability partnerships (LLPs), the model used by some PMS and alternative providers of medical services.

HMRC is seeking to weed out the avoidance of taxes using an LLP structure where the member’s terms of service are more akin to an employment relationship than self-employment.

The legislation sets out three conditions that must be met for the member to be categorised as an employee or ‘salaried member’ for tax purposes. Where all three conditions are met, the member will be subject to PAYE and National Insurance Contributions (NICs) as an employee.

Therefore, from April 6 certain partners in LLPs will be regarded as ‘salaried members’, who will be taxable as employees. This means that the LLP will be required to pay 13.8 per cent employers’ NIC on most remuneration paid to salaried members.

Unlike standard partnerships, partners in LLPs have ‘limited liability’, meaning that the risk is lessened if the partnership makes losses. Because of this, HMRC has long held concerns that some organisations were becoming LLPs purely to avoid paying NICs.

From April, LLPs will have to prove to the taxman that their partners are not simply salaried members of staff in disguise by fulfilling the three conditions, namely that less than 80 per cent of their salary is guaranteed, that they have significant influence over the practice business and that they make sufficient capital contributions from their income.