Navigating NHSPS Service Charges: Watch the Webinar Recording
The challenge of managing NHSPS service charges continues to grow, impacting GP practices across England and Wales. If you’re facing this issue, our recent expert-led webinar is your go-to resource for effectively navigating these service charges.
Join DR Solicitors for an in-depth session on the complexities surrounding NHS Property Services charges. This engaging 30-minute recording empowers GP practice professionals with essential knowledge to approach NHSPS service charges confidently and competently. Learn to negotiate more manageable terms, avoid costly disputes, and sustain your practice’s financial health.
Key Topics and Insights:
- Ongoing Disputes and Financial Implications
Understand why NHSPS service charges are unsustainable for many and the financial challenges they impose on GP practices. - Effective Legal Strategies
Elizabeth Duan and Michael Large offer comprehensive strategies on negotiating terms effectively, aiming to minimise financial burdens and ensure sustainable service charge management. - Case Studies and Legal Frameworks
Explore legal frameworks and case studies that highlight successful negotiations and the importance of strategic legal advice in managing NHSPS service charges.
Watch the Video
NHSPS Service Charges Highlights:
- Introduction by Experts
Begin with insights from Elizabeth Duan, a Commercial Property Solicitor specialising in primary care, and Michael Large, a seasoned property litigation expert. - Financial and Legal Challenges
Discover the financial and legal challenges of service charge disputes, including how they affect partner transitions and practice mergers. - Achieving Favourable Outcomes
Learn from real-world examples of how strategic negotiations and firm legal advice can lead to significant reductions in service charge liabilities. - Guidance and Core Principles
Gain insights into key legal principles and best practices that can guide you in resolving disputes effectively.
Don’t miss this opportunity to equip yourself with actionable insights from industry experts. Watch the recording and transform the way your practice handles NHSPS service charges.
Meet the Experts:
- Elizabeth Duan: Legal Director & Solicitor at DR Solicitors
- Michael Large: Commercial Property Specialist at DR Solicitors
News
Surgery owners beware! Poorly drafted Partnership Agreements can trigger unwelcome tax charges
If you are a primary care professional who owns or has a share in the surgery premises, it is crucial that you understand not only how the property is held, but also ensure that ownership is documented correctly in a partnership agreement or a separate declaration of trust document. Failure to do so could have significant legal and financial implications.
Read on to understand how you may inadvertently trigger unwelcome Stamp Duty Land Tax (SDLT) charges when partners buy into or out of the surgery and how to reduce the risk.
What’s the problem?
For various good tax and business reasons it is very common for GPs to want to hold their freehold surgery as a ‘partnership asset’. However the default position in law is that a property is owned personally by the individuals named on the title at the Land Registry, and it is NOT a partnership asset unless there is reliable evidence to demonstrate that it is. This evidence is usually in the form of a signed and dated deed or contract, such as a partnership agreement or declaration of trust.
It is not sufficient to rely on the partnership accounts as evidence of the premises being a partnership asset, as it is highly unlikely that this would stand up in court.
If you cannot prove that the premises are a partnership asset, then:
- you may have to pay Stamp Duty Land Tax (SDLT) when partners buy-in or are bought-out of the surgery
- it could lead to disputes over rental income and ownership rights with retired partners who are no longer part of the practice
- you may well be in breach of your mortgage conditions
- you could even be in breach of your GMS contract
Identifying possible issues
There are many scenarios that could cast doubt on the premises being a partnership asset. Listed below are a few recent examples that we have come across – do you recognise any of them as applying to you?
- The partnership agreement does not clearly state that the surgery is a partnership asset, although the accounts show that it is included on the balance sheet.
- A partner has moved their share into a spouse’s name or a SIPP (even though they have remained on the title).
- The building is wholly owned by retired, former partners
- The partnership has ceased to exist – either temporarily or permanently. This may occur if you have practised as a sole trader for a short amount of time, or you have incorporated the practice into a limited company.
- The property owning partners have put a lease in place to the partnership
- An employee owns a share in the surgery (such as a practice manager or salaried GP).
- The title owners have not signed the Partnership Deed which purports to turn their building into a partnership asset
- Notional rent is paid to retired partners, rather than interest on any capital not yet paid out.
- The names on the title are not current property owners. Ask yourself: will the ‘title owners’ agree that they are simply unpaid trustees holding the surgery on behalf of the partnership?
- A Declaration of Trust does not link surgery ownership to the medical partnership – you may have created a separate property investment partnership, which will have completely different rules.
How to protect yourself
Your partnership agreement and/or declaration of trust should include:
- a clear statement that the property is a Partnership Asset
- distinction between the property owning partners and non-property owning partners
- allocation of costs into ‘ownership’ costs (mortgage, property taxes) and ‘partnership’ costs (heating, lighting, cleaning)
- a ‘licence to occupy’ to non-property owners
- provision that notional rent received via the GMS contract ‘belongs’ to the property owners
- an indemnity to the non-property owning partners if the premises are mortgaged
- details of what is to happen with the surgery on retirement of a property owner
You may be tempted to put off addressing your poorly drafted partnership agreement until it is absolutely necessary, but you should be aware that rectification is rarely a quick process as there is registered property and a lot of money involved. It’s much better to fix any problems now, rather than when you are trying to complete a buy-in or buy-out with bank financing.
Also, if the property is not currently a partnership asset but you want it to be, consider making the change sooner rather than later. It takes three years after becoming a partnership asset for a surgery to be free of SDLT restrictions such that future transactions can benefit from the ‘intra-partnership exemption’. Smart succession planning makes the change in plenty of time.
How DR Solicitors can help
A great first port of call would be to reach out to us for a free partnership asset health check.
Don’t be tempted to cut corners by drafting documentation yourselves or going to a non-specialist solicitor. The building is simply too valuable to take unnecessary chances with, and remember that small errors in drafting can have very significant consequences.
As DR Solicitors we have the UK’s largest team of specialist medical solicitors, and you can be confident that we understand the critical nexus between property law and partnership law required to get the position with your freehold surgery correctly documented.
Next steps
For more information or a free, no obligation call with one of the DR Solicitors team, please contact us.
News
Is it time to incorporate your Local Medical Committee?
Local Medical Committees (LMCs) play a central role in representing and supporting GPs in their area, so it is important that they exist in a robust legal form. They have been around for over 100 years, and some of their representation functions are defined in statute. LMCs have traditionally been established as ‘unincorporated entities’, and these unincorporated entities are, in turn, recognised by the commissioners to be the representative body and to receive the statutory levy.
Many LMCs have set up companies to manage their ‘secretariat’ activities, but this is very different from incorporating the LMC itself, as the LMC can only be the body recognised by the commissioner – which is almost always the unincorporated entity, not the company.
Challenges of Unincorporated Local Medical Committees
The reason Local Medical Committees use companies for their secretariat activities is that companies benefit from limited liability and can contract in their own name. By contrast, unincorporated entities have unlimited liability and can only contract in the name of their officers. This makes it simpler to enter into employment contracts, contract with suppliers, enter into leases, manage bank accounts, etc. and gives much more protection to the company’s officers against litigation.
The problem is that when you have both an incorporated entity and an unincorporated entity with the same name and ostensibly carrying out similar functions, you must be very careful to ensure that everyone understands which functions are being carried out by which entity. Otherwise, you risk creditors and claimants arguing that they can pursue both, thus defeating the limited liability advantages of setting up the company.
Possible Solutions for Incorporating Your LMC
In an ideal world, you would do away with the unincorporated LMC entity entirely and move all LMC activity into a company. The company would then form the committee, which the commissioner would recognise as the representative body and recipient of the levy. What we believe to be a ‘first’ has recently been achieved by a Local Medical Committee with support from DR Solicitors.
The LMC set up a company limited by guarantee to represent all the GPs in their area as members and then obtained the necessary approval from the commissioner to recognise the company as the LMC. The unincorporated entity was then superfluous and was wound up, making all future LMC activity both lower risk and simpler to operate than in a two-entity solution.
Summary
This new LMC operating model has the potential to be transformational. If you are looking to improve LMC governance, it is certainly worth considering moving all LMC activity into a single limited company entity. However, it is not a ‘one size fits all’ solution, and careful consideration needs to be given to the pros and cons before doing so.
For a free initial consultation on the pros and cons of incorporation, whether you are an LMC, a PCN, or a GP practice, please call us or email enquiries@drsolicitors.com.
Note
We do not recommend trying to incorporate on your own. There are legal and tax implications for which professional advice from specialist solicitors and accountants is required. You must also comply with the NHS Act and follow a process which, to the best of our knowledge, has only been successfully done once before – with the assistance of DR Solicitors!
Readers should note that LMC incorporation is very different from PCN or GP practice incorporation. All these can be done, but the process and the pros and cons are all very different.