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They say that only two things in life are certain – death and taxes. But by knowing the basics of Inheritance Tax (IHT) it is possible to reduce your exposure to tax when you die.

On someone’s death, the calculation of IHT starts with the value of all the deceased’s assets, from which are deducted the amount of the deceased’s liabilities at the date of death and various exemptions – the most important of which are the spouse exemption and business property relief (BPR).

The part of the estate left to the deceased’s spouse is exempt from IHT, although if the spouse is non-UK domiciled the amount of the spouse exemption is restricted to £55,000.

Business property in the deceased’s estate – such as the value of a business, shares in the deceased’s company and assets used in a business – will attract business property relief (BPR) at either 100% or 50% depending on the type of asset, so the IHT on these will be either reduced or eliminated altogether.

The first, currently, £325,000 of the estate is then charged to IHT at 0%; this is called the nil-rate band and is set to remain at this level for the next couple of years at least. The excess of the estate over the nil-rate band is taxed at 40%.

For many people, there will be no IHT liability on death as the whole of their estate will be left to the surviving spouse; in that case, the nil-rate band is effectively unused, so on the death of the second spouse, the nil-rate band applicable to the estate of the surviving spouse will be increased by the percentage of the nil-rate band unused on the first spouse’s death. At present therefore, where the nil-rate band is unused on the first death, the nil-rate band on the second death is £650,000.

However this is not the end of the story. Where an individual makes a gift to another individual it is called a “potentially exempt transfer” or PET. If the donor survives for 7 years from the date of the gift, the value of the gift ceases to be part of his estate; however if the donor dies within 7 years then the value of the gift is added to his estate – where the gift was made more than 3 but less than 7 years before death and that gift is taxable, the rate of IHT is reduced.

So what can you do to reduce your exposure to IHT? Clearly reducing the value of your estate will minimise the amount of IHT you, or your spouse, will eventually pay.

While larger gifts are treated as PETs as above, it is worth noting that certain smaller gifts are entirely free from IHT so will reduce your estate regardless of when made – a single gift of up to £3,000 each year will be covered by the IHT annual exemption and will immediately fall out of your estate; the exemption can be carried forward for one tax year, so if you did not utilise it in 2010/11, you can made a gift of up to £6,000 in 2011/12. Each spouse has their own exempt amount, and each £3,000 gift is an IHT saving of £1,200 – a significant saving when taken over a period of years.

Similarly, any number of gifts of up to £250 per recipient can be made and are not treated as PETs.

Another very useful exemption is the exemption for “normal expenditure out of income” – where a series of gifts is made which can be demonstrated to be part of the donor’s habitual expenditure, to have come out of the donor’s after-tax income and to have left the donor with sufficient income to maintain his usual standard of living, then those gifts are not treated as PETs and will not be included in the donor’s estate regardless of when made. This can be particularly useful for, say, parents giving regular sums to children, as long as it can be shown that the above conditions are met.

Where possible, early IHT planning is of course advisable; insurance policies for IHT are available and your Financial Adviser can assist. Finally do ensure you have a valid and up-to-date Will to ensure that your estate is dealt with according to your wishes.

Disclaimer

Umesh Modi BA ACA, is a Chartered Accountant and Tax Advisor, and a partner at Silver Levene (Incorporating Modiplus+). He can be contacted on 020 7383 3200 or umesh.modi@silverlevene.co.uk

 As the end of the 2011/12 tax year draws nearer, this is a good time to review your tax position and take advantage of tax planning opportunities.

Tax Rates

For 2011/12, the 20% tax rate applies to taxable income of up to £35,000; income from £35,000 to £150,000 is taxed at 40% and income above £150,000 is taxed at 50% (dividend income is taxed at slightly different rates – 32.5% instead of 40% and 42.5% instead of 50%).

If you have a limited company and are considering drawing additional remuneration or dividends from the company, then you may want to base the decision as to whether to draw that income either before or after the end of the current tax year depending on the amount of income you have already drawn and therefore on what tax rate will apply to any further income. Determining the best timing – before or after 5 April 2012 – may enable you to utilise your basic rate band or avoid the 50% tax band.

Capital expenditure

The Annual Investment Allowance (AIA) currently stands at £100,000 per annum but will fall to £25,000 with effect from 1 April 2012 (for companies) or 5 April 2012 (for individuals and partnerships). The AIA provides 100% tax relief for capital expenditure qualifying for plant and machinery capital allowances up to the stated limit.

The timing of capital expenditure may therefore have a significant impact on your tax position so if you are considering further capital expenditure in the next couple of months, points to bear in mind are:

• Have you already utilised your £100,000 AIA for 2011/12? If so, consider delaying the expenditure until after 5 April 2012, if the expenditure is £25,000 or less
• If you have not utilised your AIA in 2011/12 and are planning significant capital expenditure, incurring the expenditure before 5 April 2012 (or 1 April 2012 as appropriate) will ensure the higher level of AIA

Pension contributions

There is no limit on the contributions that can be made by or on behalf of an individual into a pension scheme, although the amount of contributions on which tax relief can be obtained is restricted to the higher of 100% of relevant earnings and £3,600 (gross). Relief is available at the higher and top rates of income tax – the planned withdrawal of higher-rate income tax relief on pension contributions with effect from 6 April 2011 having been scrapped. However, if total contributions (made by the individual, the employer and anyone else on the individual’s behalf) exceed the “annual allowance”, £50,000 for 2011/12, a tax charge arises on the individual at 40% on the excess contributions.

Other year-end thoughts

ISAs: no income tax is payable on any income from the ISA investments. The maximum amount you can invest in 2011/12 is £10,680, of which up to £5,340 can be in a Cash ISA with the rest in a Stocks and Shares ISA. If you have not already done so, therefore, you may want to consider opening an ISA before 5 April 2012 to utilise this year’s maximum.

Enterprise Investment Scheme (EIS): income tax relief at 20% is available for investment of up to £500,000 in shares which qualify under the EIS; the conditions for the relief are complex, both for the investor and for the issuing company. Gains made on the disposal of EIS shares are tax-free as long as various conditions are met.

Similar reliefs to the EIS are available for investment in a Venture Capital Trust (VCT).

The Chancellor’s Autumn Statement announced plans to increase the maximum annual investment under the EIS to £1m from 2012/13 and to relax some of the conditions that have to be met by companies wishing to qualify under the EIS…

Annual exemption for capital gains tax: the annual exemption for CGT stands at £10,600 for 2011/12, so gains of up to this amount are exempt from CGT. If you have not made gains to utilise your exemption, you may wish to consider if you are able to do so before 5 April 2012.

Annual exemption for inheritance tax: a gift of up to £3,000 per year is exempt from IHT, thus reducing your estate and potentially saving IHT of £1,200. The exemption can be carried forward for one year, so if you did not use your exemption in 2010/11 you can make a gift of up to £6,000 in 2011/12, a potential IHT saving of £2,400.

Disclaimer

Umesh Modi BA ACA, is a Chartered Accountant and Tax Advisor, and a partner at Silver Levene (Incorporating Modiplus+). He can be contacted on 020 7383 3200 or umesh.modi@silverlevene.co.uk

Self assessment – it’s time!

If you have not already done so, now is the time to think about the deadlines for filing your 2011 tax return and paying your tax.

Preparing your return

Whether you are filing your return yourself or compiling information for your accountant, the paragraphs below set out some of the more common information that you (or your accountant) will need to complete your 2011 return, which covers the tax year ended 5^th April 2011 (6^th April 2010 – 5^th April 2011):

Business income:

 

If you are a sole trader or in a partnership you will need the accounts which ended during the tax year 2010/11, for instance accounts for the year ended 31 December 2010 or for the year 31 March 2011.

If your business started recently or ceased during the tax year the position will be more complex and your accountant will be able to advise you further.

If you trade through your own limited company, or are someone’s employee, then you will need your P60 and P11D for 2010/11, showing your earnings and any benefits/expenses. Company dividends paid to you in the year ended 5 April 2011 will also be included in your 2011 return.

Unearned income:

Unearned income received between 6^th April 2010 and 5^th April 2011 will be shown on your 2011 return, whether from UK or overseas sources – e.g. interest, dividends, rental income (less associated expenses) and pension income, so you will need statements, tax certificates and dividend vouchers. Where an investment is held jointly, your share of the income is shown.

If you are non-UK domiciled then the new regime for non-domiciled individuals will be relevant to you – you chose whether to pay UK tax on your worldwide income or whether to be taxed on the remittance basis (i.e. only on that overseas income which you have brought to the UK) in which case you may be required to pay a £30k “remittance basis charge”. This is a complex area and your accountant will be able to provide more details.

Capital gains:

Details of the sale of capital assets – e.g. property, investments – during the tax year will be needed for your return i.e.: the cost and sale proceeds, and any associated expenses.

 

The sale of your home will generally be exempt from capital gains tax as long as the property was used as your main residence throughout the time you owned it, so any gain (or loss) will not be included on your return.

Other matters:

Tax relief is given for charitable payments under gift aid or covenants made in the tax year and for pension contributions paid by you; investments qualifying under the Enterprise Investment Scheme will also reduce your tax liability.

 

Filing your return

The deadline for the submission of paper returns has already passed, but for online filing of returns the deadline for the 2011 tax return is 31 January 2012.

If you are filing your return online yourself, the first step is to register at www.hmrc.gov.uk for online services. You will then receive, by post, confirmation of your User ID and an activation PIN needed to get started. Once you have activated your account you will be able to prepare and submit your return online.

Paying your tax

As well as being the deadline for the submission of your 2011 return, 31 January 2012 is also the deadline for payment of your tax liability for 2010/11 – if you have already made payments on account towards the year, you may have to pay a balancing payment; if your payments on account exceed your actual liability the overpayment will either be refunded to you or set against future payments. If you are required to make payments on account towards your 2011/2012 liability, the first of these will also be due on 31 January 2012.

 

It is worth considering at this stage whether the funds you will need to pay the tax will be readily available, in case it is necessary to give notice on an account or otherwise make funds available for the payment date.

Interest and penalties

If your return is submitted after 31 January 2012, you will be charged a £100 penalty; where a partnership return is submitted late, the penalty is £100 per partner. Penalties increase steeply if the return is more than 3 months late.

Interest will also be charged from 1 February 2012 on any unpaid tax (the current rate is 3%, but could change before this date). If any part of your balancing payment remains unpaid as at 28 February 2012, a surcharge of 5% of the unpaid tax will be added to your liability, with a further 5% surcharge added on 31 July 2012 on any tax remaining unpaid at that date.

HMRC enquiries

If you submit your return before the deadline, H M Revenue & Customs have 12 months from the date after your return was submitted to raise an enquiry into it. However, if your return is submitted late, HMRC’s period for raising an enquiry is extended.

 

Disclaimer

Umesh Modi BA ACA, is a Chartered Accountant and Tax Advisor, and a partner at Silver Levene (Incorporating Modiplus+). He can be contacted on 020 7383 3200 or umesh.modi@silverlevene.co.uk

 

 

 

There is no simple answer to this question because different types of record are covered by different types of legislation, as shown by the following summary:

Value added tax

By law, VAT records have to be kept for six years unless HM Revenue & Customs allows a shorter period. Any request you make to keep records for a shorter period must be accompanied by a full explanation of why it is considered impractical to keep the records.

 

PAYE

HM Revenue & Customs recommends that pay records be kept for at least three years after the income tax year to which they relate.

 

Taxes generally

For periods before the start of self-assessment HM Revenue & Customs can issue an assessment at any time up to six years after the end of the chargeable period to which the assessment relates. There is no limit in cases of fraud or wilful default. All business records must be retained for a period of (broadly) six years.

 

Company records

Under corporation tax return, accounting records must be preserved for six years from the end of the accounting period.

With regard to the statutory books, there are no specific requirements, but the Companies Act states that an entry relating to a former member of the company may be removed from the Register of Members 10 years from the day he or she ceased to be a member.

Also, the Register of Directors and Secretary must include details of past directorships held within the preceding five years.

 

Government grants

Documents relating to Government grants must generally be kept for four years from receipt of the grant. Where grant aid is still being received, no documents should be destroyed without consulting the relevant Government department.

 

 

Employers’ Liability policy certificates

The former requirement to keep Employers’ Liability policy certificates for 40 years has been replaced by guidance. Businesses are reminded that their potential liability for illness and injury at work does not end when the policy expires. Records should be retained to ensure that any future claim can be met.

 

Limitation Act 1980 – general periods

The 1980 Act allows an action to be brought on a contract for up to six years from the event (e.g. breach) that gave rise to the claim.

Where a contract is under seal (or deed), the time limit is twelve years.

These periods govern how long invoices and other documents should be retained as evidence in case of a claim by, or against, another party.

Conclusion

Taking into account the various requirements outlined above, we recommend that you keep all records for at least six years after the end of the accounting period or tax year.

This article is based on current legislation and practice and is for guidance only. Specific professional advice should be taken before acting on matters mentioned here.

Disclaimer

Umesh Modi BA ACA, is a Chartered Accountant and Tax Advisor, and a partner at Silver Levene (Incorporating Modiplus+). He can be contacted on 020 7383 3200 or umesh.modi@silverlevene.co.uk

If you have employees you are required to operate a Pay-As-You-Earn scheme, to deduct income tax and national insurance contributions from their salary and to pay it over to H M Revenue & Customs (HMRC).

The tax is calculated according to the amount of tax-free income available to the employee and this is notified to the employer in a tax code, which is issued to each employee by HMRC according to his or her circumstances. National Insurance contributions are calculated by reference to published tables.

PAYE must be operated if the employee’s salary reaches the national insurance lower earnings limit – £102, per week, £442 per month or £5,304 per year for 2011/12.

Getting started
To operate PAYE you will need to register as an employer – this can be done online or by calling the New Employer Helpline (0845 60 70 143) and once registered you will receive a scheme reference.

Operating a payroll
Whether you use payroll software or keep records manually, the following forms will be relevant to you:

• Forms P9T, P9X and P7X – notices of coding: HMRC will issue each employee with a tax code, at the start of the tax year and during the year if circumstances change. Income tax is calculated in accordance with the tax code

• Form P11 – employee deductions sheet: each time you pay an employee you record the pay and deductions here

Each time you pay your employees you must give them a pay statement – such as a payslip – showing the gross pay, the deductions and the net pay.

What payments does PAYE apply to?
PAYE is applied to all payments received by an employee including:

• Salary
• Overtime, shift pay and tips
• Bonuses and commission
• Expense allowances paid in cash
• Statutory Sick Pay and Statutory Maternity (Paternity or Adoption) Pay
• Payments on termination of employment (unless exempt from tax)
• Certain non-cash items such as vouchers.

Paying HMRC
Amounts deducted each month must be paid over to HMRC by the 19^th of the following month or by the 22^nd if you make electronic payment, although small schemes are able to pay quarterly.

 

At the end of the tax year
At the end of each tax year, you are required to:

• Submit a form P14 for each employee showing the deductions for each employee in the year
• Submit a form P35 – employer’s annual return: this shows the total deductions in the year and is submitted to HMRC by 19^th May after the end of the tax year. Most employers are now required to complete this online, in which case the online submission of the P14s generates the P35.
• Give all employees a form P60 for their records by 1^st June following the end of the tax year – this must be in paper format

If an employee has received any expense payments or benefits in kind during a tax year, then you must submit a form P11D (or P9D if the employee earns less than £8,500 per annum), showing the value of the expenses and benefits received. The form must be submitted by 6^th July following the end of the tax year. Class 1A national insurance contributions are payable on the value of certain benefits and payment is due on the same date.

Leavers/joiners
When you take on a new employee, who has had a previous job (or who has been on benefits), he or she should provide you with a form P45, which will show the tax code and earnings since the previous 6 April. This enables you to operate the correct code when you pay the employee.

If the employee has no P45, then you must complete a form P46 for the employee to establish the correct code.

When an employee leaves, then you in turn provide a form P45 with the employee’s details which is then given to a new employer.

Forms P45 and P46 are now generally completed and submitted online.

Forms and guidance is available at www.hmrc.gov.uk/paye.

Krystyna Knight, of Silver Levene provided research for this article.

Disclaimer

Umesh Modi BA ACA, is a Chartered Accountant and Tax Advisor, and a partner at Silver Levene (Incorporating Modiplus+). He can be contacted on 020 7383 3200 or umesh.modi@silverlevene.co.uk

This month we take a closer – although necessarily fairly simplified – look at how an individual’s income tax liability is calculated.

Step 1 – identifying total income

An individual’s total income tax liability for a tax year is calculated on all the various sources of income in that year, so the first step is to identify the taxable amount of income received from each source – such as:

Employment income

The gross earnings will be shown on form P60, but to this must be added the value of any benefits in kind from form P11D. The PAYE deducted is taken into account at Step 4.

Self-employment or partnership income

The amount of taxable income, either from self-employment or from an individual’s share of a partnership’s profits, will, in general, be the amount of net profits (after business expenses and capital allowances) for the accounting period that ended during the tax year in question, although slightly different rules apply in the first and last tax year in which a business is carried on.

Pensions

The state pension is paid gross so the taxable amount is the amount received; other pensions are generally paid after deduction of PAYE, and the taxable figure is the gross amount on form P60 and again any PAYE is taken into account at Step 4.

Interest

Most interest is received net of basic rate tax but the taxable amount is the gross (i.e.: the net interest plus the tax deducted) with the tax already paid deducted at Step 4.

Rental income

The taxable amount is the rent received less expenses relating to the renting of the property. Where there is more than one rental property, income and expenses from each are added together.

Dividends

Dividends are received net of a 10% tax credit – the taxable amount is the net dividend plus the tax credit, with the tax credit taken into account at Step 4.

The sum of all the taxable amounts is the individual’s “total income”.

Step 2 – arriving at taxable income

From the amount above can be deducted various items, the most common being the following:

• Certain allowable losses
• Certain interest payments and pension payments
• Personal allowance – where an individual’s total income exceeds £100,000 the personal allowance is reduced by £1 for every £2 over that threshold until it is completely removed

 

Step 3 – taxing the income

For 2011/12 the tax rates are as follows:

Income	Tax rate on non-dividend income	Tax rate on dividend income
1 – 35,000	20%	10%
35,001 – 150,000	40%	32.5%
Over 150,000	50%	42.5%

It is necessary therefore to determine which income falls into which rate band and to do this, earned income is treated as the first “slice” of income (so that the deductions at Step 2 are deducted first against this type of income), with non-dividend investment income treated as the next slice and dividend income as the top slice.

Where the individual makes charitable donations or pension contributions net of basic rate tax, so that basic-rate tax relief is obtained when the payment is made, the amount of the basic rate band is extended to give higher-rate tax relief for these payments.

To the extent that each slice of income falls into each band, the above tax rates are then applied accordingly and the tax at each rate is calculated.

Step 4 – taking account of tax already paid, tax credits and tax reducers

From the total tax are deducted the following:

 

• Tax reducers, such as relief under the Enterprise Investment Scheme
• Tax credits on dividends
• PAYE deductions from earnings or pensions
• Tax deducted at source from savings income

The resulting amount is the tax payable for the year; where the PAYE or tax deducted on savings income exceeds the liability, a refund is due; however tax credits on dividends cannot create a repayment.

Step 5 – paying the tax due

Subject to any payments on accounts already made for the year in question the tax liability id due for payment by 31 January following the end of the tax year.

Krystyna Knight, of Silver Levene provided research for this article.

Disclaimer

Umesh Modi BA ACA, is a Chartered Accountant and Tax Advisor, and a partner at Silver Levene (Incorporating Modiplus+). He can be contacted on 020 7383 3200 or umesh.modi@silverlevene.co.uk

Introduction

One of the most inevitable questions an individual will come across during the life of their business will be whether or not to operate as a limited company or not. Umesh Modi explains the facts and puts to bed all those concerns anyone may have had once and for all!

The decision to go it alone can be daunting enough, therefore the simplest way of getting started is usually to operate as a Sole Trader. At the initial stages this can have its own advantages especially where losses or relatively low profits are anticipated in the opening years. However as your business matures it is likely that your business may be better off as a Limited Company. It is at this point many people are apprehensive as the red tape involved in running a company is often perceived by many as being over complicated and time consuming. Though this can be true to some extent, with the aid of a good accountant the process today with the aid of online filing, this can be a seamless and pain free experience than originally anticipated.

The Advantages of a Limited Company

One of the main advantages to incorporating is the ‘limited liability’ of having your business as a separate entity. This offers the ability of keeping your business affairs separate to that of your personal affairs, and to anyone who works for themselves will know this can be a very thin line indeed! However more importantly unlike a sole trader, where ones personal assets such as a house or car can be at risk of being seized to pay the debts of your business in times of crisis; a limited company will shelter such burden and responsibility. The shareholder liability is essentially only limited to the amount he or she has invested in the company.

It is important to note that a company has the same rights as an individual; a corporation can own property, carry on business, incur liabilities and sue or be sued. You as the shareholder of the company cannot be held responsible for the debts of the corporation unless you’ve given your personal guarantee. Other advantages of operating via a limited company are;

§  Corporations Carry On – A company has an unlimited life span unless it is wound up. The corporation will continue to exist even if the shareholders die or leave the business, or if the ownership of the business changes hands.

§  Raising Money Is Easier: Corporations also have more ability to raise money, which may make it easier for your business to grow and develop. While corporations can borrow and incur debt like any sole proprietorship, they can also sell shares and raise equity capital. This is a big advantage because equity capital generally does not have to be repaid and incurs no interest. (Of course, by issuing shares, you are reducing your percentage of ownership in the company.)

§  Income Splitting: Another tax advantage of incorporating is income splitting. Corporations pay dividends to their shareholders from the company’s earnings. A shareholder does not have to be actively involved in the corporation’s business activities either to receive dividends. Your spouse and/or your children could be shareholders in your corporation, giving you the opportunity to redistribute income from family members in higher tax brackets to family members with lower incomes that are taxed at a lower rate.

§  Increased Business? – Having ‘Ltd’ as part of your company’s name may increase your business, as people perceive corporations as being more stable than unincorporated businesses. If you’re a contractor, you may also find that some companies will only do business with incorporated companies, because of liability issues.

§  Potential Tax Deferral & Income Control. Saving the best to last is the potential tax saving a limited company can offer.  As a sole trader you will be taxed on the net profit with little or no potential of tax saving. However, with a limited company your income and indeed your tax liability have greater flexibility.   By having a company you can decide the best way of extracting your money, this alone can offer you a tax saving as deferring paying some tax (by taking out less) will enable you to realise tax savings if you are then in a lower tax bracket, or if the tax rates have, as in recent times change.

How it works – a simple example

Let us first look at the difference in the tax liability for a sole trader and a company with a net profit of £120,000.

	Self-Employed	Company
Profit	£120,000.00	£120,000.00
Total Tax & NIC	£45,723.00
Corporation Tax		£24,000.00
Difference	£21,723.00

A Sole trader is subject to income tax and class 4 National insurance on the net profits of his trade. A company’s profit on the other hand is subject to corporation tax, currently this is at 20%.

The trick is then how these profits are extracted out of the company and into the pockets of its shareholders i.e. you!

The most common method is to vote a small salary of £6,000.  There is no tax due on this amount as it is below the personal allowance of £6,475. The remainder is extracted via a dividend. Dividends come with a 10% tax credit (as corporation tax would have already been paid) this essentially means that where a dividend falls within the basic rate band, there is no more tax to pay. Higher rate tax payers have to pay a further 22.5% of the dividend.

 

		Tax
Corporation Tax   (as above)		£24,000.00
Example 1
Amount Extracted	£40,000.00
Salary	6,000.00	Nil
Dividend	34,000.00	Nil
Total	40,000.00
Total Income Tax + CT		24,000.00
Saving through incorporation		£21,723.00
Example 2
Amount Extracted	£60,000.00
Salary	6,000.00	Nil
Dividend	54,000.00	5,145.63
Total	60,000.00	5,145.63
Total Income Tax + CT		29,145.63
Saving through incorporation		£16,577.37

*The above illustration if for the Tax year 2011/2012. The tax liability is based on the assumption that the individual has no further income for that Tax year.

Disadvantages of a limited company

So far incorporating your business sounds like a great idea but there are also potential disadvantages to incorporating that need to be considered as follows.

1. Another Tax Return – When you incorporate your small business, you’ll have to file two tax returns each year, one for your personal income, and one for the company. This, of course, will mean increased accounting fees; however the overall affect is generally outweighed by the tax savings.

2. Increased Paperwork – As mentioned there is a lot more paperwork involved in maintaining a corporation than a sole proprietorship or partnership. This includes minutes from meetings, corporate documents etc.

3. Some Tax inflexibility’s – Unlike a sole proprietorship or partnership, corporate losses can’t be deducted from the personal income of the owner. A corporation doesn’t have the same flexibility in handling business losses as a sole proprietorship or a partnership. In a corporation, however, these losses can only be carried forward or back to reduce the corporation’s income from other years.

4. Liability May Not Be As Limited As You Think – The prime advantage of incorporating is the gaining of ‘limited liability’, however in some cases this may be undercut by personal guarantees and/or credit agreements required by many lending institutions. If a company has insufficient assets to secure a loan, creditors often insist on personal guarantees from the business owner(s), so although technically the corporation has limited liability, the owner still ends up being personally liable if the corporation can’t meet its repayment obligations.

Abbreviated disadvantages

1. Another Tax Return – An Additional Corporation tax Return will be required as well as your personal Tax return

2.      Increased Paperwork – A company is required to keep a record of more information with regard the conduct and decisions made within the company. i.e. minutes

3. Losses – corporate losses can’t be deducted from the personal income of the owner.

4. Personal Guarantees- . If a company has insufficient assets to secure a loan, creditors often insist on personal guarantees from the business owner(s)

Conclusion

 

So, Should you incorporate your business? In a nutshell the advantages clearly still exist; I would however strongly recommend that you discuss your personal situation with your accountant. Each situation is unique and only once the exact picture is considered can one assess whether incorporation will be worth it to you! But if you’re looking for greater flexibility in planning your taxes, this is certainly the right path.

 

 

Disclaimer

Umesh Modi BA ACA, is a Chartered Accountant and Tax Advisor, and a partner at Silver Levene (Incorporating Modiplus+). He can be contacted on 020 7383 3200 or umesh.modi@silverlevene.co.uk

Budget 2011
George Osborne, delivered the 2011 Budget on 23 March 2011 and we look at the main provisions, some of which were announced previously and confirmed in the Budget.

Income Tax Rates and Allowances
Allowances:

Personal allowance	6,475	7,475
Age allowance (65 – 74)	9,490	9,940
Age allowance (> 75)	9,640	10,090
Married couple’s allowance	6,965	7,295
Age-related allowance income limit	22,900	24,000

The personal allowance will be increased to £8,105 in 2012/13.

Tax rates:

Basic rate – 20%	0 – £37,400	0 – £35,000
Higher rate – 40%	£37,401 – £150,000	£35,001 – £150,000
Top rate – 50%	Over £150,000	Over £150,000

The basic rate band will reduce to £34,370 in 2012/13. Other rates and allowances will be increased by the rate in the RPI.

Savings and investments
Pension contributions:

The Annual Allowance for tax relief on pension contributions is reduced from £255,000 to £50,000 from 5 April 2011 and the Lifetime Limit is reduced from £1.8 million to £1.5 million from 5 April 2012. Members of registered schemes will be able to carry forward unused Annual Allowance for up to three years.

Furnished holiday lettings:

The current rules on furnished holiday lettings have been preserved although with some restrictions:

• To qualify as a furnished holiday letting, from April 2012, the property must be available for letting for at least 201 days per annum and actually let for at least 105 days
• From April 2011, losses on FHLs will not be available to offset against other income.

Enterprise Investment Scheme:

From 6 April 2011, the rate of tax reducer relief for EIS investments will increase to 30% of the investment and from 6 April 2012, the investment limit for EIS shares will increase to £1 million per annum. The same increases will apply to investment in Venture Capital Trusts.

There are also changes designed to increase the number of companies which can take advantage of the scheme:

• The number of employees a qualifying company can have will rise from 59 to 250
• The size limit for a qualifying company will rise from £7 million to £15 million
• Maximum annual investment will rise from £2 million to £10 million

ISAs

From 6 April 2011, the limit increases to £10,680, with the cash limit increasing from £5,100 to £5,340.

Businesses and Employers

Corporation tax:

From 1 April 2011, the main rate of corporation tax will drop to 26%, with further falls to 25% from 1 April 2012, and to 24% and 23% in the following two years. The small company rate reduces to 20% from 1 April 2011.

National Insurance:

The much-discussed rise in National Insurance Contributions goes ahead from 6 April 2011:

Class 1 for employees:            12% (up from 11%) on earnings of £139 – £817 per week and at 2% (up from 1%) thereafter

Class 1 for employers: 13.8% (up from 12.8%) on earnings over £136 per week

The Chancellor announced consultation on merging income tax and national insurance as a way to reduce the administrative burden on employers, although any changes are likely to be a long way off.

Capital allowances:

Capital allowances are to be reduced from April 2012 – the 20% writing-down allowance becomes 18% and the 10% rate which applies to certain assets (most notably high-emission cars) reduces to 8%.

The Annual Investment Allowance, which provides 100% tax relief on expenditure will be reduced from April 2012 from £100,000 per annum to just £25,000.

A short-life asset election will be available from April 2011 onwards for any asset with an anticipated life of up to 8 years

Research and development expenditure:

The current 175% relief for qualifying R&D expenditure by small/medium-sized enterprises will become 200% from 1 April 2011 and then 225% from 1 April 2012. The minimum expenditure limit of £10,000 is abolished, enabling companies to claim for smaller amounts.

Approved mileage rate and company cars:

Currently employees may be paid a tax-free mileage allowance of up to 40p per mile for the first 10,000 miles and up to 25p thereafter for using their own car for business purposes. The 40p allowance rises to 45p per mile from 6 April 2011, although the 25p rate remains.

Company car and fuel benefits:

The percentages and CO2 emission bands used to calculate the benefit are adjusted slightly and fuel benefit rises to £18,800 multiplied by the percentage appropriate to the car concerned.

Capital Gains Tax and Inheritance Tax

The CGT annual exemption rises from £10,100 to £10,600 from 6 April 2011; the cumulative lifetime limit for entrepreneur’s relief for gains on the sale of businesses increases from £5 million to £10 million.

The nil-rate band for IHT remains frozen at £325,000 until 2014/15 but will be increased from 2015/16 in line with the Consumer Prices Index.

VAT

Registration and deregistration limits increase to £73,000 and £71,000 respectively. The rate of VAT remains unchanged.

Krystyna Knight, of Silver Levene provided research for this article.

 

Disclaimer

Umesh Modi BA ACA, is a Chartered Accountant and Tax Advisor, and a partner at Silver Levene (Incorporating Modiplus+). He can be contacted on 020 7383 3200 or umesh.modi@silverlevene.co.uk

 

 

 

 

Negotiating a lease is never easy and, as competition law changes, pharmacists now have even more to consider when sealing the deal. As pharmacy leases last an average of 15 to 20 years, it’s important to ensure your lease covers all eventualities, say healthcare lawyers Charles Russell. At the company’s conference last month, associate Claire Timmings and solicitor Jennifer Hotston explained the common pitfalls to consider before signing that all-important contract.

1 Check your exclusivity rights
Exclusivity clauses may make sound business sense, but changes to the Competition Act mean these could be deemed anti-competitive in future. From April onwards, the Competition Act will apply to land agreements, meaning exclusivity deals in shopping and health centres might constitute a breach.

 But Ms Timmings and Ms Hotston say this is unlikely to have an adverse effect on pharmacies. “It’s always necessary to consider the specific facts of the case, and the Office of Fair Trading expects only a minority will be deemed anti-competitive,” they explain. “If there’s a breach, in the worst case scenario it could veto the whole agreement, but most courts will try to exclude the offending provision.” According to the experts, breaches are most likely to occur in rural locations, where competition is less rife.

2 Negotiate a get-out clause
Pharmacy contracts tend to cover a long period, which means it’s important to have some flexibility if circumstances change. Charles Russell advises pharmacies to negotiate five yearly tenant-only breaks, which would allow the tenant to walk away from the property if it’s no longer profitable. This would ideally include a break allowing you to relocate with the nearest GP practice if the situation arises.

3 Ensure you can renew
Renewing your contract should be a simple step, but complications can arise when landlords have other interests at heart. “Consider that the landlord can refuse to renew under certain circumstances, for example if there’s an opportunity to redevelop the property or they require the property back for their own purposes,” say Ms Timmings and Ms Hotston. They advise tenants to protect themselves by building an option to renew into the contract.

4 Specify your permitted use

Charles Russell lawyers advise pharmacies to carefully consider their permitted use. “If you are classified as a dispensing pharmacy this only allows you to sell medication, while a retail pharmacy includes other products, and a wider retail lease would allow you to sell a broader range of goods, such as mobility aids,” they explain.

5 Verify planning permission
Planning permission is a major consideration when signing your lease, as this can impose a number of restrictions. If your pharmacy only sells a small percentage of retail products, you are classified as a D1 – a non-residential institution. However, retail pharmacies are automatically an A1 classification, which is more difficult to secure. Charles Russell lawyers warn this could be a potential issue for pharmacies located in health centres. “Health centres have a D1 planning classification and the planning consent often doesn’t mention a pharmacy,” explain Ms Timmings and Ms Hotston. “This is worth bearing in mind if your pharmacy has a wider retail use and falls outside of the D1 category.” Hours of use and delivery times are also subject to planning permission, so tenants are advised to check for any restrictions.

6 Authorise alterations
Tenants will naturally wish to make alterations to their properties, but this can sometimes cause conflict with the lease. Even seemingly minor alterations, including changes to the signage, should be approved. “When you’re negotiating the lease, you need to include certain exclusions that will allow you to do certain things to your pharmacy,” say Charles Russell lawyers. “External alterations such as air conditioning, signage and security grilles should be approved in the lease.”

7 Protect against uninsured risks

Damage to your pharmacy is stressful enough without worrying about the terms of your lease. But leases often state that tenants are responsible for repairing damage, and might also stipulate that rent is paid while the property is unused. This can be particularly crucial in cases such as flooding, where the property may be unfit for use over a period of months. “Try to include specific provisions so that your pharmacy is covered,” advise Ms Timmings and Ms Hotston.

8 Review your rent
Rent reviews can be calculated in a number of different ways, and your landlord’s chosen method could make a significant difference to your outgoings. “Most rents will increase along with the Retail Prices Index, but you can look at alternatives such as increasing with the Consumer Price Index,” say the Charles Russell lawyers. Another option is to look at an open market rent, which reflects what a willing tenant would pay for the property in your area. But Ms Timmings and Ms Hotston advise against the option of setting rent according to local health centre traffic. “We wouldn’t recommend that from a tenant’s perspective, as it often doesn’t account for a decrease in numbers, and the number of visitors to the local health centre doesn’t necessarily correlate with pharmacy traffic,” they explain.

Tips for your CPD entry on lease negotiations

Reflect Do I understand how upcoming legislation could affect my pharmacy?

Plan Read this article and review my pharmacy’s lease.

Act Consult legal advice if necessary

Evaluate Is my pharmacy protected against lease pitfalls?

In an ideal world businesses would keep all their receipts and invoices in a logical, coherent and easy to access manor; unfortunately thisideal does not always prevail. HMRC have cottoned onto this fact and in this age of general empty coffers they have decided that they are going to target people who fail to maintain their records and their initiative to do this will start in the latter part of 2011.

HMRC under took a consultation to consider this matter in December 2010 full details can be found on the HMRC site. HMRC are not going to be introducing new legislation in order to implement this crackdown. They will be using existing laws and simply enforcing them.

 

 

What Records Need to Be Kept

Unincorporated Businesses

Records must be kept so that your Tax Return can be completed fully and accurately.Businesses at the very least mustmaintain a record of all sales and takings and a record of all purchases and expenses.  If the business is also VAT registered, then VAT accounts, VAT sales, purchase invoices and import and export documents must all be kept.

 

The businesses or their accountant would then use these records to create a profit and loss account – which shows the sales income received and the expenses paid, and what profit/ loss has actually been made. The records must be kept for a minimum of 5 years after the normal filing deadline eg: 2009/10 must be kept until 31^st January 2016.

 

Companies

Companies must maintain accounts records (including detailsof assets, liabilities, income &expenditure); business records (bank statements andpaying-in slips, accounts books, purchases and sales information).

 

Business records must be kept for minimum 6 years from the end of the Corporation Tax account period.eg: example, if your accounting period ends on 31 March 2009, you’ll need to keep the records for that period until at least 31 March 2015.HMRC have a comprehensive though not exhaustive fact sheet called to maintaining records which can be accessed from the following url: http://www.hmrc.gov.uk/factsheet/record-keeping.pdf

 

How to keep your records

The law does not dictate how records must be kept. .However HMRC recommend originalpaper documents that show tax has been deducted are kept eg;P60.

 

Other records can be kept electronically (on a computer or any storage devicesuch as disk, CD, memory stick or microfilm) as long as the method used captures all the information on the document (front and back) andallows the information to be presented in a readable format should HMRC ever need to access it.

 

HMRC Business Record Checks

HMRC intends to start selecting business records on the basis of risk assessments and in some cases on a random basis to identify businesses that have poor record keeping.

HMRC will give 7 days’ notice and at a prearranged time enter the businesses premises and check statutory business records where this is required to check the tax position.

The visit can take a matter of hours or in the base of a large complex business this can take several days if not more. They will typically look at a sample or the records and in some cases take some records away. If any business assets are kept at another location HMRC may also wish to visit them

If you run your business or keep stock or other assets at home HMRC should be told of this in advance. In this case the visiting inspector will only enter those parts of your home which are used for business purposes unless you invite the Inspector into other parts; which is not advisable.

A factsheet can be found on the HMRC site which states the procedures involved with such compliance checks. Please see the following: http://www.hmrc.gov.uk/compliance/cc-fs3.pdf.

Following the Visit

After the visit HMRC will “grade” the records they have seen and will rank it the quality of the records they see. The current suggested (not confirmed) ranking system is as follows

Good Records	– Documented acknowledgement of the perceived adequacy. – A potentially lower risk of future compliance checks.
Minor record keeping failures	– Documented explanation to the trader of the findings of the Business RecordsCheck and of the actions expected to be taken to rectify the position going forward. – A slightly increased risk of future compliance checks.
No records or significant record keeping failures	– Documented explanation to the trader of the findings of the Business RecordsCheck and of the actions expected to be taken to rectify the position goingforward. – The award of a penalty (see below). – The likelihood of a future Business Records Check (where the penalty forcontinued and significant record keeping failures apply) and/or and increased likelihood of other compliance interventions.

 

If a business is deemed by HMRC to have failed to maintain satisfactory records a maximum penalty of £3,000 will be imposed.

Are You Prepared

Administration and record keeping is not the most exciting part of a business however considering the potential ramifications of noncompliance it is worth considering: “are you prepared for this increased scrutiny?”, “how would your business rank”? In light of the fact HMRC are suggesting they will commence these checks in the latter half of this year it may be time to consider looking at your record keeping systems and preparing for a potential “Business Records Check” vist.

Jasbinder Bahara, of Silver Levene provided research for this article.

Disclaimer

Umesh Modi BA ACA, is a Chartered Accountant and Tax Advisor, and a partner at Silver Levene (Incorporating Modiplus+). He can be contacted on 020 7383 3200 or umesh.modi@silverlevene.co.uk

With a significant number of H M Revenue & Customs enquiries focusing on business expenses, this is an important area and one where it is easy to make mistakes. We look below at the most common types of business expenses and at what is, and is not, allowable for tax purposes.

The general rules

There are two basic rules. Firstly, in computing trading profits, no deduction is allowed for items of a capital nature and similarly capital receipts are not taxable.

So when buying items for on-going use in a business – a computer, say, or a car – the full cost is not automatically deducted from profits; instead, capital allowances are claimed, although the effect of the 100% Annual Investment Allowance (AIA) – of which more below – is that for many businesses the full cost of capital expenditure is deducted in the year it is incurred.

 

Secondly, in order for an expense to be deductible, it must have been incurred “wholly and exclusively for the purposes of the trade”. Expenses which have a dual purpose – trade and non-trade – are not deductible, although HMRC will allow the business proportion of an expense, where such a proportion can be defined.

Specific expenses

Travel and subsistence: The cost of travelling in the course of the business is allowable but not that of travelling between home and the place of business. The “dual purpose” rule means that where there is a material private element, the whole expense of a trip will be disallowed, even the part attributable to business purposes. Thus, no part of expenses incurred in travelling abroad partly for a holiday and partly on business is allowable.

The above rule also requires the disallowance of costs of food, drink and accommodation.  However, a deduction is allowed for any reasonable expenses incurred on food or drink by a individual either at, or travelling to, a place in the course of carrying on the trade, but only if two conditions are met:

• that a deduction is available for the associated travelling costs; and
• that either:

o   at the time the expenses on food and drink are incurred, the trade is itinerant; or

o   the trader does not visit the place more than occasionally in the course of the trade and the travel is not part of a normal pattern

Hotel accommodation is deductible where a business trip necessitates one or more nights away from home (and away from the business base).

Motor expenses: individuals can claim their actual business motoring costs in their accounts and in practice HMRC will generally agree a business-use proportion of total motor costs, based on mileage records; alternatively, taxpayers with a turnover not exceeding the VAT registration threshold (currently £70,000) at the time they first use the vehicle, may instead use the statutory tax-free mileage rates applicable to employees to arrive at an allowable amount. In that case, no other motoring expenses or related capital allowances may be claimed (other than interest on a loan to purchase the vehicle).

Entertaining: entertaining expenses are not allowable, except where provided for the trader’s employees.

Legal and professional costs: legal and professional costs associated with the taxpayer’s trade are broadly allowable, but following the general rule above, any such costs associated with capital items are not allowable against trading profits; where the item is a chargeable asset, e.g. property, related legal/professional costs may be claimed against the gain arising on its eventual disposal.

Use of home as office: if an individual uses part of his home for business purposes a proportion of the household expenses may be deducted in computing taxable profits, based on the usage of the property. In practice, where there is only small use of the home, HMRC will often agree a small flat-rate allowance for this purpose.

A point to note is that the exemption from capital gains tax for a gain arising on the sale of an individual’s home me be affected if a claim is made that a part of the property is used exclusively for business purposes.

Repairs & renewals: following the rule on capital expenditure, the cost of repairs and renewals are broadly allowable but the cost of enhancements or improvements are considered to be capital in nature.

Depreciation: although a business can chose the rate at which to depreciate its assets, any depreciation charged in the accounts will be excluded for tax purposes and replaced by capital allowances calculated at statutory rates.

For the current tax year, the AIA is £100,000, so 100% of capital expenditure of up to that amount can be deducted against profits. Where capital expenditure exceeds £100,000, the balance attracts capital allowances of either 20% or 10% on a reducing balance, depending on the type of asset.

Cars (purchased after April 2009), where expenditure is not covered by the AIA, attract capital allowances at 100% (where emissions do not exceed 110g/km) or 20% (where emissions are 110 – 160g/km) or 10% (where emissions exceed 160g/km).

Krystyna Knight, of Silver Levene provided research for this article.

Disclaimer

Umesh Modi BA ACA, is a Chartered Accountant and Tax Advisor, and a partner at Silver Levene (Incorporating Modiplus+). He can be contacted on 020 7383 3200 or umesh.modi@silverlevene.co.uk

What is non-alcoholic fatty liver disease?
Non-alcoholic fatty liver disease is defined as liver fat >5 per cent in the absence of other identifiable causes. It is the most common cause of chronic liver damage in western countries and around 70 per cent of patients with type 2 diabetes have fatty livers.

Why is it a problem?
It increases the risk of non-alcoholic steatohepatitis and hepatocellular carcinoma (HCC). It can cause cirrhosis, and doubles the risk of both chronic kidney disease and cardiovascular disease.

What should pharmacists do to help?
Reducing visceral fat seems to be a particularly important intervention, as it is a strong risk factor for hepatic steatosis, inflammation and fibrosis. In patients with diabetes, statins may reduce HCC risk by 25-40 per cent.

Case Study
The effects of a fatty liver Patricia is a 46-year-old call-centre worker with a BMI of 30.7kg/m2, dyslipidaemia and a three-year history of type 2 diabetes. She’s receiving vildagliptin and simvastatin. Before starting vildagliptin, her liver enzyme levels were within the normal reference range.

Patricia tells you that she feels fatigued and weak, and reports that she’s beginning to lose weight. She wants to buy a tonic to give her a boost, and an OTC sleeping aid. Patricia thinks that her fatigue and weakness result from tiredness brought on by sleepless nights spent worrying about her financial problems and working overtime. After noting that her HbA1c control has declined in recent months, you refer her to her GP, who asks the diabetic clinic for a review.

Biopsy reveals that Patricia’s liver contains fat deposits and fibrosis. The hepatologist diagnoses non-alcoholic steatohepatitis.

A year later, Patricia presents to her GP with fluid retention and gastrointestinal bleeding, leading to the diagnosis of cirrhosis. She dies six years later from hepatocellular carcinoma.

Diabetes causes numerous well-known complications, including chronic kidney disease (CKD), heart disease and retinopathy. However, the increased risk of liver diseases such as non-alcoholic steatohepatitis (NASH) and hepatocellular carcinoma (HCC) with diabetes is less well known.¹

Nevertheless, diabetes-related liver disease can prove fatal (NASH can cause a 10-fold rise in the risk of liver cancer),² increase the risk of developing ‘classic’ complications including retinopathy, and influence treatment choice.

Diabetes-related liver disease
Non-alcoholic fatty liver disease (NAFLD) is defined as liver fat >5 per cent in the absence of other identifiable causes such as alcohol abuse, viral hepatitis or certain medications including corticosteroids and oestrogen.¹ It is the most common cause of chronic liver damage in western countries.

Obese people and those with insulin resistance or diabetes are especially vulnerable to NAFLD.³ Indeed, around 70 per cent of patients with type 2 diabetes have fatty livers and NAFLD tends to be particularly aggressive in people with diabetes. Nevertheless, most diabetic NAFLD patients have normal liver transaminase levels.¹

Although fatty liver has traditionally been considered relatively benign,⁴ 20-30 per cent of people with NAFLD develop NASH.³ This is characterised by chronic necrosis, inflammation and, in many patients, fibrosis.¹

NASH can progress to cirrhosis, fatal liver failure and HCC.³ Around one in 200 NASH patients develop HCC within seven years.⁴

Despite these risks, healthcare professionals often overlook people with significant NASH due to the condition’s long, indolent clinical course.⁵ NASH causes few symptoms, there are few sensitive, non-invasive diagnostic tests, and liver function tests are often normal.¹

Fatty livers are both a cause and consequence of diabetes. Cirrhosis, for example, can cause diabetes,⁶ while diabetes increases mortality among patients with cirrhosis.⁷

Around 30 per cent of cirrhosis patients have concurrent diabetes.
Furthermore, more than 40 per cent and 17 per cent of patients with chronic hepatitis C infections show glucose intolerance and diabetes respectively, while 30-70 per cent have fatty livers.

Indeed, hepatitis C’s core protein can induce insulin resistance, steatosis (fatty liver) and diabetes.⁷

On the other hand, steatosis predisposes to diabetes. Scores on the Fatty Liver Index (FLI) range from 0 to 100 and are equivalent to the percentage chance of having a fatty liver.

Among people who do not drink excessive amounts of alcohol, after adjusting for potential confounding factors, a FLI >70 increases the risk of developing diabetes over the next nine years five-fold in men and more than 20-fold in women compared with those with a FLI <20.³

 

Consequences
Despite a relatively benign reputation,⁴ NAFLD is associated with considerable morbidity and mortality. For example, after adjusting for age and sex, patients with type 2 diabetes and NAFLD are more likely to develop non-proliferative or proliferative retinopathy and CKD than those without NAFLD. Indeed, NAFLD doubles the risk of developing CKD and proliferative retinopathy independently of other factors such as BMI, waist circumference, hypertension, diabetes duration, HbA1c and medication.⁸

After adjusting for confounders, NAFLD also roughly doubles cardiovascular disease (CVD) risk in patients with type 2 diabetes.⁹ Adjusting for
the metabolic syndrome (which also increases NAFLD risk5) reduces the strength of the association, but the risk arising from NAFLD is 50 per cent higher than among patients with type 2 diabetes alone.⁹

As mentioned above, NASH can progress to cirrhosis and cancer. Fibrosis progresses in 26-37 per cent of NASH patients, while up to 9 per cent develop cirrhosis within around five years. Another 18-29 per cent of NASH patients show improved histology, with the disease remained stable in the remainder.

BMI and diabetes increase the risk that fibrosis will progress and 4-27 per cent of cases of NASH eventually transform into HCC. Diabetes increases HCC risk between 1.86-fold and four-fold.⁵

Implications for pharmacists
Detecting and treating NAFLD presents problems. For example, NASH often produces few or no symptoms, especially during the early stages. Patients with advanced NASH or cirrhosis may report fatigue, weight loss and weakness.

Cirrhosis can also cause fluid retention, muscle wasting, gastrointestinal bleeding and liver failure.10 Elevations in liver tests, such as alanine aminotransferase (ALT) or aspartate aminotransferase (AST), may raise a suspicion of NASH.¹⁰ However, NASH may also develop without altering liver transaminases.

Currently, a liver biopsy is necessary for a definitive diagnosis, although new imaging methods and biomarkers may reduce the need for invasive procedures in the future.¹

As around 70 per cent of type 2 diabetes patients show fatty livers,¹ it may be reasonable to assume that a patient has NAFLD until proven otherwise. Pharmacists could suggest that patients raise the issue with their diabetologist or GP.

Currently, there are no proven treatments for NASH and lifestyle modification remains the gold-standard approach to management.¹ However, some interventions already used to treat obesity and type 2 diabetes may help.

For example, in people with NAFLD or NASH, weight-loss decreases hepatic steatosis and liver transaminases, as well as modestly improving necrosis, inflammation and fibrosis.

Reducing visceral fat seems to be a particularly important intervention, as it is a strong risk factor for hepatic steatosis, inflammation and fibrosis.¹ While agents such as orlistat help reduce BMI, they seem to have no additional benefit in NAFLD or NASH compared to weight loss alone.¹ Many obese people and those with type 2 diabetes take statins as primary or secondary prevention. In patients with diabetes, statins may reduce HCC risk by 25-40 per cent. Future studies are needed to confirm these results.⁵

Some oral antihyperglycaemic drugs may improve NASH, including dipeptidyl peptidase-4 (DPP-4) inhibitors. DPP-4 inactivates glucagon-like peptide-1 (GLP-1), which stimulates insulin secretion and inhibits glucagon production.

So, blocking GLP-1 improves glycaemic control. However, DPP-4 metabolises several other substrates, including several chemokines implicated in NASH pathogenesis.

DPP-4 may also mediate fibrogenesis. Indeed, NASH patients show increased levels of serum DPP-4 compared to controls.

Furthermore, DPP-4 levels in the liver correlates positively with the severity of hepatic steatosis. Animal studies suggest that linagliptin, a DPP-4 inhibitor currently in phase III trials, reduces hepatic fat accumulation.⁴

Finally, hepatic disease can also influence the choice of antihyperglycaemic drug. For example, patients with hepatic impairment – including pre-treatment ALT or AST greater than three times the upper limit of normal (ULN) – should not receive vildagliptin¹¹ or Eucreas (vildagliptin and metformin). Pharmacists need to be familiar with hepatic restrictions on drugs taken by type 2 diabetes patients.

Liver disease is both a cause and consequence of diabetes. NASH, for example, markedly increases the risk of complications, including CKD, retinopathy and HCC. Early detection and treatment is important to try to interrupt progression,¹ although many patients are asymptomatic and liver enzymes may be normal.

Weight loss and several drugs used in type 2 diabetes management may attenuate the risk, although more research is needed. Pharmacists also need to remain cognisant of the impact of liver impairment on treatment choice.

Liver diseases are an under-appreciated complication of diabetes and obesity, but healthcare professionals should not underestimate their influence on morbidity and mortality.

Mark Greener, a former research pharmacologist, is a freelance writer on health-related issues.

Non-alcoholic fatty liver disease – what you need to do

 

Non-alcoholic fatty liver disease (NAFLD)
NAFLD is indicated by more than 5 per cent liver fat in the absence of other identifiable causes. Due to its high prevalence, NAFLD should always be suspected in patients with type 2 diabetes. Patients should be advised to discuss the condition with their GP or diabetes specialist, as it increases the risk of several complications.

 

Non-alcoholic steatohepatitis (NASH)
Characterised by fat in the liver along with inflammation and damage, NASH often has few symptoms. It may be indicated by elevated liver test readings, but this is not guaranteed. There are no confirmed treatments for NASH, and patients should be given lifestyle advice, focusing on reducing visceral fat. Drugs such as orlistat have shown no additional benefit in treating the condition compared with weight loss alone.

 

Hepatocellular carcinoma (HCC)
The majority of liver cancers are caused by HCC, which develops in about 0.5 per cent of patients with NASH in seven years. HCC has a poor prognosis as around 80-90 per cent of lesions cannot be removed completely by surgery, and HCC is usually fatal within six months. Prevention by changing lifestyle choices to reduce risk is the main focus of treatment, although statins may reduce the risk of developing HCC by 25-40 per cent.

 

Key facts about non-alcoholic fatty liver disease

• Around 70 per cent of patients with diabetes have NAFLD, while 30-70 per cent of patients with hepatitis C are affected.

• Between 20 and 30 per cent of patients with NAFLD will go on to develop NASH.

• About one in 200 patients with NASH will develop liver cancer in seven years.

• Patients with type 2 diabetes and NAFLD are at double the risk of a host of conditions, including CVD, CKD and proliferative retinopathy.

Reflect
What are the symptoms of NAFLD? What is the risk of hepatocellular carcinoma for patients with non-alcoholic steatohepatitis? Which antihyperglycaemic drugs have been shown to benefit NASH and reduce hepatic inflammation?

Plan
This article discusses non-alcoholic fatty liver disease and its link with type 2 diabetes. It details how fatty livers can be a cause and a consequence of diabetes, the progression to cirrhosis and hepatocellular cancer as well as implications for pharmacists.

Act

• Find out more about NAFLD including information that might help you explain the condition to patients from the Patient UK website at

• http://tinyurl.com/ NAFLD01 and http://tinyurl.com/NAFLD02.

• Read more about cirrhosis and its symptoms and diagnosis from the British Liver trust website at http://tinyurl.com/NAFLD03.

• Find out more about hepatocellular cancer from the Cancer Research UK website at http://tinyurl.com/NAFLD04.

• Revise your knowledge of retinopathy, of which the risk is increased with NAFLD, from the RNIB website at http://tinyurl.com/NAFLD05.

Evaluate

 Are you now confident in your knowledge of NAFLD and its link with diabetes? Are you familiar with the conditions that NAFLD can progress to such as cirrhosis and cancer?

 

References

1. Cusi K Nonalcoholic fatty liver disease in type 2 diabetes mellitus Curr Opin Endocrinol Diabetes Obes 2009;16:141-9

2. Zhou XH, Qiao Q, Zethelius B et al. Diabetes, prediabetes and cancer mortality. Diabetologia 2010;53:1867-76

3. Balkau B, Lange C, Vol S et al. Nine-year incident diabetes is predicted by fatty liver indices: the French D.E.S.I.R. study. BMC Gastroenterol 2010;10:56

4. Schuppan D, Gorrell MD, Klein T et al. The challenge of developing novel pharmacological therapies for non-alcoholic steatohepatitis. Liver Int 2010;30:795-808

5. Starley BQ, Calcagno CJ, Harrison SA. Nonalcoholic fatty liver disease and hepatocellular carcinoma: a weighty connection. Hepatology 2010;51:1820-32

6. Nordenstedt H, White DL, El-Serag HB. The changing pattern of epidemiology in hepatocellular carcinoma. Dig Liver Dis 2010;42 Suppl 3:S206-14

7. Garcia-Compean D, Jaquez-Quintana JO, Gonzalez-Gonzalez JA et al. Liver cirrhosis and diabetes: risk factors, pathophysiology, clinical implications and management. World J Gastroenterol 2009;15:280-8

8. Targher G, Bertolini L, Rodella S et al. Non-alcoholic fatty liver disease is independently associated with an increased prevalence of chronic kidney disease and proliferative/laser-treated retinopathy in type 2 diabetic patients. Diabetologia 2008;51:444-50

9. Targher G, Bertolini L, Poli F et al. Nonalcoholic fatty liver disease and risk of future cardiovascular events among type 2 diabetic patients. Diabetes 2005;54:3541-6

10. de Marco R, Locatelli F, Zoppini G et al. Cause-specific mortality in type 2 diabetes. The Verona Diabetes Study. Diabetes Care 1999;22:756-61

11. Galvus Summary of Product Characteristics http://www.medicines.org.uk/emc/medicine/20734 accessed 25 September 2010

 

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Last month’s Health and Social Care Bill paved the way for the establishment of Monitor, an economic regulator with competition powers relating to health and adult social care services, including pharmacy. Lawyer Suzanne Rab (pictured, right) reveals what this means for your practice

 

1. Will pharmacies need to be licensed by Monitor?

Any provider of a health care service for the purposes of the NHS must hold a licence.  Monitor will award licences.  In the consultation on the initial proposals there was general support that the economic regulator’s licensing regime

should encompass all providers of NHS-funded services in England, whether foundation trusts or from the private or voluntary sector.  Details of an exemption regime will be set out in secondary legislation.  Pharmacies should generally assume that they will be subject to regulation by Monitor.

 

2. How will Monitor recover fees for licensing?

Monitor will have the power to levy fees on providers to meet licensing costs.  However, the licence fees must only be used to support licensing functions such as issuing licences, assessment of providers and any related enforcement action.  Monitor will fund other regulatory activities within its remit (including competition inquiries) through funding from an allocation agreed with HM Treasury.

3. How will Monitor and the Care Quality Commission co-operate in operating their different regimes?

Although Monitor will be the economic regulator, the role of the Care Quality Commission (CQC) will be strengthened as a quality inspectorate.  The health bill requires Monitor and the CQC to co-operate in the operation of their respective regimes.  In particular, they have a duty to work to create a single integrated process of licensing and registration.  The government has emphasised that safety must not be compromised in the interests of economic regulation.

4. What protections will be available if Monitor wants to modify licence conditions?

Monitor will have a duty to consult when developing the first set of licence conditions that will be applied to all licensed providers in a specific defined category.

If Monitor wants to amend licence conditions, it will have a duty to consult with providers who will be able to raise objections.  If the number of objections is above a certain threshold (which will be defined in regulations) Monitor will need to respond to the objections or make a reference to the Competition Commission.  The Competition Commission will then have a power to make a decision that is binding.

5. How will Monitor address anti-competitive behaviour by pharmacies and what are the risks of being involved in anti-competitive practices?

Monitor will have concurrent powers with the Office of Fair Trading (OFT) to apply competition legislation in health and adult social care services.  These powers will include a power to levy fines of up to 10 per cent of relevant turnover for breach of the competition law prohibitions on restrictive agreements and abuse of a dominant position.

The competition law powers will work in combination with the licensing regime.  For example, relevant licence conditions could include prohibitions on tying or bundling products or services.

6. How will Monitor address anti-competitive behaviour by commissioners?

The bill contains a power for regulations to be issued by the Secretary of State which will govern procurement by commissioners.  There will be a right for parties with a legitimate interest to complain to Monitor if they believe that commissioners have breached the rules.  The overall aim is to help to prevent commissioners from reaching agreement or taking action that restricts competition.  NHS commissioners will be subject to equivalent rules which prohibit anti-competitive activity as those applying to providers under competition law.

7. What will be the role of Monitor in relation to price setting?

Monitor must publish a national tariff that sets out certain health care services which are or may be provided for the NHS and the method used for determining prices for those services, specifies the maximum price and provides rules for determining the price for health care services which are not specified in the national tariff.  Where commissioning consortia object to Monitor’s proposals, Monitor may make a reference to the Competition Commission, who may veto the changes or put the matter back to Monitor.

8. Will the new regime help create a more level playing field for pharmacies?

The new regime could be expected to promote a level playing field for pharmacies.  For example, one concern highlighted in the consultation was that, under current arrangements, GPs and community pharmacies provide the same services so that when commissioning decisions are made by GP consortia there may be a risk that they will favour their GP practices.  A concern raised by community pharmacies is that discrimination may not necessarily be overt but could take the form of more subtle discrimination such as setting conditions which other providers cannot meet. The Bill provides a framework to seek to ensure that commissioning decisions are based on objective criteria and that the NHS Commissioning Board and GP consortia are subject to competition law requirements.

9. What will happen next and how soon can we expect changes in practice?

The bill will now have to go through a series of readings and amendments before it becomes legally-binding legislation.

The wider changes to the NHS will be completed over the next four years.  The next year will focus on designing and planning the framework.  According to the proposals, the NHS Commissioning Board and the new-look Monitor will come into effect from April 2012 and the first full year of the new system will be 2013/14.

10. What other health care regulatory developments should pharmacists keep in mind?

The proposals must be seen against the background of government and regulatory policy to promote competition in the health care sector.

Competition law applies only to undertakings that are involved in economic activity.  There has been some uncertainty regarding the extent to which this applies to providers of health care that are funded by the state.  The previous government established the Cooperation and Competition Panel to review anti-competitive activity in the health service.  However, this introduced further complexity since it remained possible for both the OFT and the Cooperation and Competition Panel to have power to investigate.  The upcoming legislation giving Monitor concurrent power with the OFT to enforce competition law within the NHS should be seen in this context.

{SOURCE}

You must raise your business game to survive in the new health service, says Protomed CEO Norman Niven (pictured, right)

There’s no turning back, folks. £40 million worth of cutbacks and the dissolution of PCTs are just some of the changes we have to contend with over the next few years. But behind all of this uncertainty is opportunity. This is the nudge pharmacists need to raise their game – a chance to revolutionise the pharmacy business model to make sure they don’t just survive the next three years, but grow. By shifting their income away from the NHS, pharmacists should aim to gain 50 per cent of their revenue from fee-for-service means by 2016.

With the role of GPs and primary carers morphing into that of a business manager, they will come to rely even more on pharmacists to advise patients on how to manage conditions and medication. But as the new system forces pharmacists to show a return on investment, it’s time to think beyond the community and re-consider the bottom line.

We’re all agreed, diversification is key, but pharmacists need to be careful about commercial avenues they venture into. As in any sector, uniqueness commands a premium. And that means offering what are truly pharmacy-only services and not getting dragged into schemes that any untrained wannabe can offer – screening comes readily to mind. Avoid putting all your eggs in one basket, yes, but be sure to put them in the right baskets.

“But how to reduce our reliance on the NHS,” I hear you cry? By thinking like an entrepreneur. Do what you do best. At school we had the three Rs, in pharmacy it’s the three Ms, managing dispensing, managing medication usage and monitoring patient compliance. These are truly pharmacy-only services that are marketable to the private sector. Collaborating with health insurance companies to monitor compliance and reduce claims, managing clinical trials for big pharma companies and running discharge programmes for hospitals – these all boost revenue alongside the business of dispensing medication. E-health is another as yet untapped service that pharmacy can and should take ownership of.

This is the biggest transformation in the NHS’s 63-year history. Pharmacy has shown time and time again it isn’t scared of change, and now’s the time to act so you come out of it with a clean bill of health.

Protomed designs and develops medication management solutions including flagship product Biodose, a monitored dosage system

(SOURCE)

Cyklo-F is the latest POM to P transfer, which has been launched amid controversy after it was announced the product would be available exclusively through Boots. Here, Alan Nathan gives you the facts you need to know about the medicine.

What is Cyklo-F?
Tranexamic acid 500mg film-coated tablets. Each pack contains 18 tablets.

What is it licensed a P medicine for?

s
The reduction of heavy menstrual bleeding (menorrhagia) over several cycles in women with regular, 21-35 day cycles, with no more than three days of individual variability in cycle duration.

 

What is meant by “heavy menstrual bleeding”?
Menorrhagia has been defined as menstrual blood loss exceeding 80ml per cycle. Approximately 10 per cent of women of reproductive age have blood loss exceeding 80ml and 5-15 per cent of women are thought to be affected to such a degree that treatment should be considered. However, in practice menorrhagia is generally self diagnosed through a woman’s subjective assessment of blood loss.

How does it work?
The fibrinolytic system contributes to the prevention of blood clots through conversion of an inactive plasma enzyme, plasminogen, to plasmin, which has a fibrinolytic action. Women with menorrhagia have been found to have increased levels of plasminogen activators in the endometrium of the uterus compared with women with normal blood loss. Tranexamic acid is an antifibrinolytic agent that competitively inhibits the activation of plasminogen to plasmin. It therefore has an antifibrinolytic effect, but it is not thrombogenic. As a POM, it is also indicated for preventing blood loss during surgical procedures.

What is the dosage?
Two tablets three times daily for as long as is needed, for a maximum of four days. The dosage may be increased if there is very heavy menstrual bleeding, but a total dose of 4g daily should not be exceeded.  Treatment should not be initiated until menstrual bleeding has started. Patients should consult their doctor if menstrual bleeding is not reduced after three menstrual cycles.

 

How safe is it?
Tranexamic acid has been in use as a POM for over 40 years (in the UK since 1983) and has been available without prescription in Sweden since 1997; treatment for menorrhagia with the drug corresponds to 3.2 million patient-years, and a further 15 million patients have been treated for other indications. The risk of thromboembolic events in women taking the drug is considered to be no higher than that in fertile women generally. There is no evidence that tranexamic acid increases the risk of thrombosis in women taking hormonal contraceptives.

What are the side-effects?
Common side-effects (more than 1 in 100 patients, less than 1 in 10 patients):
•    Nausea
•    Diarrhoea
•    Vomiting
Uncommon side-effects (more than 1 in 1,000 patients, less than 1 in 100 patients)
•    Allergic skin reactions

 

Are there any interactions with other drugs?
Cyklo-F will counteract the thrombolytic effect of fibrinolytic preparations.

What are the contraindications?
•    Mild to moderate renal insufficiency
•    Hypersensitivity to tranexamic acid or any of the excipients
•    Active thromboembolic disease, a previous thromboembolic event or a family history of thrombophilia
•    Haematuria
•    Irregular menstrual bleeding, patients using warfarin or other anticoagulants
•    Women taking oral contraceptives.

 

Who should consult their doctor before taking Cyklo-F?
Women who meet any of the following criteria should consult a doctor before taking Cyklo-F:

•    Older than 45 years
•    Obese
•    Diabetic
•    Has polycystic ovary syndrome
•    Has a history of endometrial cancer in a first-degree relative
•    Is receiving unopposed oestrogen or tamoxifen.

 

Which symptoms prompt a pharmacist to refer a patient requesting Cyklo-F to her GP?
•    Irregular periods
•    Bleeding between periods
•    Bleeding after the menopause
•    Pain during intercourse
•    Bleeding after intercourse
•    Premenstrual pain
•    Pelvic pain
•    Symptoms of thrombosis – pains or feelings of heaviness in the chest, unusual pains or swellings in the arms or legs; sudden shortness of breath; fainting; haemoptysis.

 

What serious conditions can be associated with menorrhagia? 
•    Endometrial cancer
•    Ovarian cancer
•    Endometriosis
•    Fibroids
•    Chronic pelvic inflammatory disease
•    Thyroid disorders
•    Blood clotting abnormalities.

Can Cyklo-F be taken while breastfeeding?
The concentration of tranexamic that passes into breast milk is around 1 per cent the concentration in the mother’s blood. An antifibrinolytic effect in the infant is unlikely, but nevertheless breastfeeding women should consult their GP before taking the drug.

 

How much does Cyklo-F cost?
The recommended retail price is £8.99 for a pack of 18 tablets.

When is Cyklo-F available?
It will be launched on January 31 2011.

 

When will pharmacies get supplies?
Cyklo-F will be available initially only from Boots stores as the company has an exclusivity arrangement with the product’s manufacturer, Meda Pharmaceuticals. Concerns have been expressed by some pharmacy organisations over the deal.

At the Update Pharmacy pre-reg trainee Jan is on prescription reception. A woman approaches her holding a consultant physician’s private prescription form.

“Can you do this prescription for my husband?” she asks. “I’ve been to two other chemists already. They both seemed puzzled by it and then just said that they didn’t have it.”

“Well,” Jan replies, “even if we don’t have it in stock I’m sure we could get it for you very quickly. Can I have a look at the prescription?”

The woman hands it over and Jan looks at it. It reads:

‘Sativex spray 1x3x10ml

Start with one spray daily, increasing gradually if necessary by one spray per day until optimum relief is obtained. Maximum dose: 12 sprays daily.’

“I’m afraid that I’m not familiar with this medicine,” Jan says, “but give me a minute.”

She then takes it to pharmacist David Spencer, who looks at it and says: “Yes, I know what it is. But if she wants it, she’ll have to go back to the prescriber. And, in any case, I think she’ll be wanting to get this on the NHS.”

QUESTIONS

1. What is Sativex and what is it used for?
2. What is its legal classification?
3. Why will the patient or his representative need to go back to the prescriber?
4. Why will the patient be wanting to get the drug on the NHS?

ANSWERS

1. Sativex is an oromucosal spray containing the cannabinoids cannabidiol and delta-9-tetrahydrocannabinol in a 1:1 ratio.

It is derived from whole plant extracts of the plant Cannabis sativa. In the UK it is indicated as an add-on treatment for patients with moderate to severe spasticity as a result of multiple sclerosis who have experienced an inadequate response to other anti-spastic medicines.

2. Sativex is a Schedule 1 controlled drug, but the Home Office has issued an open general licence for the product; this removes the legal requirement for doctors, pharmacists and patients to apply for individual licences with the Home Office in order for it to be prescribed, dispensed and possessed respectively. To be legally valid prescriptions must comply with the prescription-writing requirements for CD Schedule 2 drugs, but Sativex is exempt from CD record-keeping requirements.

3. In line with Schedule 2 prescription requirements, for private prescriptions Sativex must be prescribed on standardised private prescription forms issued by PCTs. Also, the total quantity of the medicine must be stated in words and figures.

4. The cost. The basic price of a 3x10ml pack is £375.

REFERENCES

1. Royal Pharmaceutical Society, Sativex factsheet (www.rpharms. com/support-tools/sativex.asp)

2. SPC for Sativex Oro-mucosal Spray (www.medicines.org.uk/EMC/ medicine/23262/SPC/Sativex+Oromucosal+Spray/#COMPOSITION)

Mobility aids are a huge, largely untapped market and pharmacists could become the first port of call for their provision in England if a fledgling scheme takes off, finds Francesca Robinson
A government scheme to make mobility and daily living aids available through pharmacies is set to open up an interesting and profitable new market.
The government is looking to pharmacies in England to provide these products because there have been growing problems with the way the service has traditionally been provided.
The equipment – ranging from simple aids for daily living such as eating and drinking utensils, grab rails and raised toilet seats to more complex equipment such as pressure care mattresses, hoists and lifts – helps millions of people to live independently in their own homes.

But currently only 40 per cent of people who are entitled to have the equipment provided by the state are receiving it.

There are long waits for assessment by occupational therapists and for subsequent delivery of the equipment from a loan store. The process is expensive for local authorities, which provide the products in most areas and have to pay for delivery and recycling of the equipment.

So the Department of Health (DH) has launched the Transforming Community Equipment Services (TCES) programme, which will see people entitled to state-funded mobility aids issued with prescriptions by occupational therapists. The prescriptions can be exchanged for products stocked by any accredited retailer – and the DH is targeting pharmacies to become such providers.

If they wish, users can top-up the prescription by paying extra for a more advanced or luxurious piece of equipment. Pharmacists will be reimbursed for TCES products at a price fixed by a national tariff.

Phil Stephens, the then DH TCES project lead who launched the scheme, says: “We wanted to create an open marketplace, not only for the people who receive prescriptions but also for those who want to buy the equipment themselves.

“Pharmacies are well trusted by their customers and are located in the communities where people live, so they tend to know the people who will be receiving the prescription and any other health needs they might have. It is an ideal fit.”

The scheme has already been piloted by councils in the north west and in the last year has gone live in several London boroughs. The DH hopes to have two-thirds of local authorities on board within three to five years.

How to get involved
The first thing a pharmacy will hear about the scheme is when a letter drops through their door from their local authority inviting them to a briefing event. This is the point at which they can register an interest.

Pharmacists who want to take part must be accredited by their local council. This involves going on a short training programme to ensure they and their staff are competent to advise on the suitability of products and demonstrate the safe and correct use of equipment. Some authorities are providing free training, while others are charging pharmacists cost price – anything up to £130.

Pharmacies will be expected to stock smaller items so that customers can pick them up in-store. Bulkier items will be sold from catalogues and pharmacies will negotiate with wholesalers to deliver the products on a daily basis. They will then have to either deliver and install the products themselves or pay a company to fulfil that part of the transaction.

The benefits for pharmacies
Around 60 per cent of people who need mobility aids are not getting them and Mr Stephens estimates the retail value of the market is potentially worth more than £1 billion.

“Pharmacists will make more profit from selling daily living aids than from selling shampoos and trying to compete on price with Asda. If people go to the pharmacy to buy a daily living aid, they will tend to buy more than one. There are good margins to be made on them,” he says.

“What we are trying to do is create an accessible marketplace for these products. At the moment, consumers don’t know there is a market out there.”

Hatul Shah – an independent contractor who is part of the pharmacy supplier Sigma, which has a mobility aid arm, Sigmobility – has been working with the DH to develop the programme and believes the scheme represents a significant business opportunity for pharmacists.

“Mobility products will give an instant profit margin and is a niche market, which will bring new customers into the shop. Also, it fits well with what we do in the pharmacy; it is all about providing care,” he comments.

Mr Shah says pharmacists can expect to make a profit of around 20 per cent on a TCES line and around 45 per cent on a product sold privately. This compares with around 5 per cent profit on selling disposable nappies.

He observes: “Pharmacists have been hesitant about this new area – they are reluctant to change. But slowly they are realising there is a market here and with the ageing population there is an increasing requirement for these products.

“There is potential for massive growth in this market which could generate a lot of revenue for pharmacists. When you have got the government pushing a scheme like this, you can’t ask for anything more.”

Case study 1: Boots

Earlier this year, Boots trialled the TCES scheme in “a number” of its stores across the UK.

The multiple is interested in supplying independent living aids because it fits with its ethos of offering a wide choice of products and services to meet the requirements of its customers, a spokesperson says.

Boots is no longer dispensing the equipment in-store, because the trial found local variations in requirements, expectations and market conditions made it difficult for the multiple to operate the service consistently across its national chain. “For a national retailer, meeting the different requirements that each local authority naturally has brings operational complexity,” a spokesperson says.

The company also found some logistical challenges in delivering the in-store service. A spokesperson explains: “Unlike independent mobility retailers, pharmacies do not normally have space to store or display the tariff products, so order them when a prescription is received. The customer then comes to the store to collect the product once it has been delivered.

“This can be a disadvantage, particularly when the customer wants a product urgently.”

But Boots is still providing the independent living aids online. Over 600 daily living and mobility aids are stocked at www.boots.com – customers can order online or in any store, and orders are delivered direct to their home addresses.

Case study 2: Holborn Pharmacy, Camden, London

Pradip Patel became involved in the scheme, partly because he viewed supplying mobility aids as part of his caring role – and also because he felt his business could make money on the products.

“We are currently dispensing about two or three items a week,” Mr Patel says. “The most popular items have been bath boards, perching stools and bath stools and raised toilet seats. So far only a few people have topped up their prescriptions.

“We are now stocking around 30 of the lines we know will sell. We always keep a selection of walking sticks and crutches and we will start displaying these items as well, so people might see them and buy more.

“Delivering mobility aids can be difficult as we are in central London and a lot of people live in flats. It can also be time consuming – for example, it can take 10 to 15 minutes to put up a perching chair.”

Mr Patel has two members of staff accredited to dispense mobility aids and says the two-hour training provided free by Camden Council was good.

“I see the scheme as an add-on to what we are doing at present, but it is still early days. When there are bigger volumes, it will be worth keeping more items in stock,” he says.

Case study 3: Southwark Council

The scheme went live in Southwark in February with 14 accredited retailers, 10 of which are pharmacies, and the council’s TCES project manager Taylor Jakks says it is now “mainstreamed – part of our day-to-day business”.
The number of monthly prescriptions is increasing and the council has now redeemed almost 400. Retailers have also reported that customers have been topping up their products and self-funding additional items, Mr Jakks says.

The most frequently prescribed items are: plastic grab rails, pick-up and reaching aids, perching stools, bath steps, commodes, general furniture raisers, raised toilet seats, bed lever and trolleys.

To join the scheme, pharmacies paid £130 per person for accreditation training, which involves a four-hour e-learning course, plus a further three hours face to face, familiarising retailers with the equipment and related issues, so that they become experts and can give good information and advice. “We expect the price of the training will fall as the market for assessor training grows,” Mr Jakks says.

Pharmacists redeem the prescriptions through the council’s online ordering portal and are on immediate payment terms to receive reimbursement within a week.

One issue has been the size of pharmacists’ shops and their ability to keep large amounts of stock. “We have three pharmacies that are a good size and can keep stock and exchange products immediately for prescriptions. We encourage the smaller shops to keep four or five different catalogues so they can offer people a choice of products so that they don’t have to hold vast amounts of stock,” says Mr Jakks.

Pharmacists make a profit of around 22 per cent on TCES items. “But what my retailers have realised is that it’s the top-up and additional sales on which they can make higher margins,” says Mr Jakks. “Getting a retailer to hold stock and become a source of information and advice encourages people to buy more items earlier privately for themselves. This might prevent accidents, while encouraging people to become more independent and less reliant on the state.”

Tips for your CPD entry on mobility aids

Reflect: Would my patients benefit from an independent living aids service?

Plan: Consider whether my pharmacy could get involved in the TCES scheme or  otherwise provide mobility equipment.

Act: Join the TCES scheme where possible, or introduce independent living aids to pharmacy if appropriate.

Evaluate: Do my patients benefit from my independent living aids service?

The public health white paper recognises the value of community pharmacy, but what slice of the cake will the sector get? Zoe Smeaton looks at the best and worst case scenarios

As a “valuable and trusted public health resource” with a key role to play in smoking cessation campaigns and a chief pharmaceutical officer working closely with the public health community, pharmacy seems to have done pretty well out of the government’s public health white paper. Healthy Lives, Healthy People highlights pharmacy as a valuable profession, with the potential to do much more. And as Alastair Buxton, head of NHS services at PSNC, says: “Securing such a positive endorsement is a huge win and a testament to what’s been happening in pharmacy.”

Best case scenario
Experts agree that in a best case scenario, pharmacy could stand to gain considerably from this white paper. The ability of Public Health England to direct the NHS Commissioning Board could open the door for nationally agreed pharmacy services, Mr Buxton says.

Alternatively the reforms could lead to service templates, Boots UK says, which could enable more consistent commissioning at a local level. Or local commissioners could even be told they have to consider pharmacy as a provider, in DH community pharmacy tsar Jonathan Mason’s best case world.

The services in question could include smoking cessation, weight management and sexual health services, and as Georgina Craig, commissioning community pharmacy network lead at NHS Alliance, says, even some services currently in the GP contract could be up for grabs.

However, rosy as this all sounds, pharmacists would be right to have reservations. “I am concerned that the Department of Health has a track record of praise and promises for community pharmacy, but nothing actually changes. Will it be different this time?” asks James Lindsay, head of corporate relations at AAH.

Worst case scenario
If it isn’t, experts agree the worst case scenario would not make a happy ending for community pharmacy. They warn if pharmacy doesn’t make its case to commissioners, other providers could step in and secure all the public health funding for their own services. As Ms Craig puts it: “GPs [could] make a more compelling case than pharmacy and corner the market in public health services through their inclusion in GMS in areas where pharmacy is starting to grow its evidence base.” There could be no new services for pharmacy, alongside decommissioning of existing services, Mr Mason fears.

John Nuttall, managing director of the Co-operative Pharmacy, says: “A worst case scenario would see nothing concrete happening and huge local variability in terms of accessibility to services and health outcomes.”

Hemant Patel, secretary at North East London LPC, goes a step further, suggesting: “The worst case is that pharmacy is left with very little other than dispensing, then [we see] a reduced number of pharmacies because it will be more efficient to have 20 pharmacies doing 15,000 items a month than 40 doing 5,000.”

Pharmacy can avoid this fate, experts agree, but not without some effort. Andy Murdock, pharmacy director at Lloydspharmacy, says to achieve a best outcome, “pharmacy must step up to the plate and not expect it to be delivered as a matter of right”.

And whether the white paper is a threat or an opportunity “depends on how active pharmacists are in promoting the case for community pharmacy”, Mr Lindsay agrees.

Making the case
Making that case and ensuring commissioners understand the benefits pharmacy services can bring are the keys to success. As Ms Craig says: “How big a slice of the cake pharmacy gets will depend on the quality of its sales pitch to commissioners and the general public.”

But the work must be done at all levels, right down to individual pharmacists promoting their services to GPs and local directors of public health. Boots UK says it will be “essential” for contractors to engage with GP consortia and directors of public health in the future, for example. And pharmacists need to be collecting data on their services and interventions, Mr Mason advises. As Mr Murdock warns: “Pharmacy will need to record data far more rigorously than ever before in order to demonstrate our value.”

Quite whether pharmacy is up to this challenge remains to be seen: a C+D poll last week showed 88 per cent of readers were not talking to GP consortia yet and had no plans to do so. But experts have been quick to condemn those not making the effort and are clear that pharmacy has no choice but to start doing so quickly. Education and guidance from the national bodies and employers may well be needed, but as Mimi Lau, Numark’s director of professional services, concludes: “Pharmacy needs to wake up and act now.”

Five ways to help get the best from the white paper

1. “Get to know who’s who in your area – who are the directors of public health? – and put yourself in front of them.”
   Jeremy Main, managing director, Alliance Healthcare
2. “Take small steps: find out what is going on locally, talk to your practices, do some research, talk to others that can help and then develop an action plan.”
   Mimi Lau, director of professional services, Numark
3. “Consider creating pharmacy-led consortia which could engage GP-led consortia. Pharmacies will need to think about collaborating.”
   James Lindsay, head of corporate relations, AAH
4. “Individual pharmacists need to share their success stories with local commissioners.”
   Liz Stafford, clinical commissioning lead, Rowlands Pharmacy
5. “Contractors should develop a clinical business development plan (if they have none) and decide what role they plan to have in delivery of public health services. “
   Georgina Craig, commissioning community pharmacy network lead, NHS Alliance