Through, not to

A great deal of network money lands in a practice bank account without ever being the practice's income in any meaningful sense. Recorded as turnover it inflates the practice's apparent size, distorts profit per partner, and can make the practice look more profitable than it is — which matters most at exactly the moment a prospective partner is deciding what to pay to buy in.

The question the accounts should answer

Of the money that arrived, how much did this practice keep, and what did it cost to earn? Where the practice hosts a role on behalf of the network, the employment cost and the reimbursement should be visible against each other rather than netted into general staff costs where nobody can see whether the arrangement washes its face.

Worth knowingHosting staff for a network means taking on the employer obligations — payroll, pension, employer National Insurance and the employment risk if the role ends — while the funding comes from elsewhere and may not cover all of it. That can be a perfectly sensible arrangement. It should be entered into with the full cost visible rather than discovered in the year-end accounts.

It reaches the pension too

Pensionable pay depends on what is genuinely the practitioner's income from the contract, so how network money is recorded and attributed feeds through into the superannuation certificate. It is one of the clearest reasons for the accounts and the superannuation work to sit with the same people.

Common questions

Is PCN money the practice's income?

Often not, and getting this wrong distorts everything above it in the accounts. Money that flows through the network to fund a shared role is not practice income in any meaningful sense even when it passes through the practice's bank account. Recording it as turnover inflates the practice's apparent size, distorts profit per partner, and can make a practice look more profitable than it is at exactly the moment a partner is deciding whether to buy in. That is not a technicality — an incoming partner pricing a share off an inflated turnover figure is buying something that does not exist.

How should ARRS money be treated?

Separately, and traceably. The question to be able to answer at any point is simple: of the money that arrived, how much did this practice actually keep, and what did it cost us to earn it? Where a practice hosts a role on behalf of the network, the employment cost and the reimbursement need to be visible against each other rather than netted into general staff costs where nobody can see whether the arrangement washes its face. Once it is visible, the decision about whether to keep hosting a role becomes a straightforward commercial one rather than a matter of opinion between partners.

What happens when a practice hosts staff for the network?

The practice takes on the employer obligations — payroll, pension, employer National Insurance, and the employment risk if the role ends — while the funding comes from elsewhere and may not cover all of it. That is a legitimate arrangement, and it is one that should be entered into with the full cost visible. We set the accounts up so that the answer is arithmetic rather than argument — including the redundancy exposure, which is the cost most often left out of the original discussion and the one that lands hardest if funding ends.

Does this affect superannuation?

It can. Pensionable pay depends on what is genuinely the practitioner's income from the contract, so how network money is recorded and attributed feeds through into the certificate. It is one of the reasons the accounts and the superannuation work belong together rather than with two different advisers who each assume the other has thought about it. Where they are split, the question to ask your accountant is simply whether the network money has been considered in the certificate — the answer is often no.