BIM24671 - Mutual associations: specific activities: NHS doctors’ co-operatives: new general medical services contract from 1 April 2004

Effect on mutual trading status

A new General Practitioners’ (GP) contract for doctors came into existence from 1 April 2004. GPs had until 31 December 2004 to decide on the provision of the out-of-hours patient care element.

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 assessable to CT under Case I Schedule D.

Where a co-operative contracts with a PCT or PCO to provide out-of-hours cover for reward it is likely that those transactions will amount to trading. 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.

In anticipation of these changes many NHS doctors who were members of doctors’ co- operatives have 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.

It should also be borne in mind that not all GPs have contracted out of providing out-of-hours patient care and therefore some NHS GP co-operatives may continue to satisfy the conditions for mutual trading that are set out at BIM24020.

It is essential that you establish all the facts before venturing an opinion as to whether the co- operative carries on a trade and if such a trade is a mutual trade.