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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Meaning of trade: mutual trading and members clubs: mutual associations: specific activities: NHS doctors' co-operatives: introduction and layout of guidance

Prior to April 2004 General Practitioners’ (GP) contracts with the NHS required the GP to ensure their patients had 24 hours a day access to appropriate medical care. This means that outside normal surgery hours GPs had to provide emergency medical care for their patients. GPs could do this either personally or through a properly qualified deputy. Many doctors joined GP co-operatives (where doctors group together in a rota) to provide their out-of-hours services.

Some GP co-operatives have formally established themselves as companies, most frequently companies limited by guarantee. Other co-operatives have a less formal structure. Some co-operatives have established treatment centres where patients can be seen out-of-hours.

A new GP contract for doctors came into existence from 1 April 2004 under which GPs could opt out of providing out of hours patient cover. Most GPs chose to opt out, effectively ending any contractual obligation to provide out-of-hours patient care cover. This responsibility now rests with Primary Care Trusts (PCTs) in England and Wales and Primary Care Organisations (PCOs) in Scotland and Northern Ireland. The PCTs & PCOs contract directly with other parties, some of which will be NHS doctors’ co-operatives, to provide out-of-hours patient care. In this new arrangement the GP members of the co-operatives are not entering into an agreement with each other whereby they provide their own funds to render themselves a service. The PCTs & PCOs pay the co-operatives directly for this service.

The PCTs & PCOs are contracting with and paying the NHS doctors’ co-operatives to provide the out-of-hours service to third parties (i.e. the patients). In such a scenario, if the co-operative is carrying on a trade it cannot be regarded as a mutual trade. Any profits will be taxable trade profits. However, whether particular activities are conducted in such a way as to amount to a trade is essentially a question of fact. There is detailed guidance at BIM20050 onwards.

Many NHS doctors who were members of doctors’ co-operatives before April 2004 set up companies registered under the Industrial and Provident Societies Acts (see CTM40500 onwards) and became members of these companies. These companies contract with the PCTs & PCOs to provide out-of-hours patient care. For the reasons outlined above, if the activities amount to a trade it will not be regarded as a mutual trade. In addition, the rules and constitution of the company registered under the Industrial and Provident Societies Acts will require any surplus on winding-up or dissolution to go to a successor body or to charity. Such a requirement is contrary to BIM24110, which requires that any surplus go back to the members and to no one else.

Not all GPs have contracted out of providing out-of-hours patient care and the following guidance applies to co-operatives set up to provide such GPs’ out-of-hours services. In relation to such co-operatives, you need to consider two interrelated questions:

  • whether the co-operative is carrying on a trade, and
  • if the co-operative is trading, the extent to which that trade is a mutual trade.

The typical GP co-operative is organised on a ‘not for profit’ basis. The absence of a profit-seeking motive does not preclude a finding of trading - see BIM24045.

The guidance that follows covers:

BIM24660 Essential pre-requisite
BIM24665 Does the trade meet the criteria?
BIM24670 Varieties of co-operatives
BIM24675 National association of GP co-operatives representative body