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The advantages and disadvantages of LLPs and Mutuals in Primary Care

There are currently only four types of business vehicle permitted to hold GMS contracts. These are:

  1. Individual GPs (who have unlimited liability)
  2. Unlimited liability partnerships including at least one GP (the most common structure)
  3. Limited partnerships including at least one GP
  4. Companies limited by shares including at least one GP shareholder

There are statutory mechanisms enabling a GMS contract to be transferred between types 1, 2 and 3, but no statutory mechanism enabling a transfer to or from type 4. The rules for PMS are slightly different, but given the right of PMS contractors to return to GMS the difference is not material for the purposes of this note.

The current options for practices to limit their liability are restricted. They could transfer a GMS contract into a limited partnership, but these entities require at least one partner to have unlimited liability for all the risks of the business. Since only a subset of the partners have limited liability, this would create obvious difficulties in a GP partnership. Using a Company limited by shares would limit the exposure of all the shareholders to the value of their capital, but this is not normally available to practices as there is no mechanism to transfer the GMS contract into the company.

Limited Liability Partnerships (LLPs)

LLPs retain the central feature of partnerships, being that partners both own and manage the business. In a company, by contrast, ownership and management are split between the shareholders and directors. Partnerships are often the preferred business vehicle in the professions because the alignment of ownership and management encourages close collaborative working. This in turn facilitates the transfer of tacit skills and good risk management on which the reputation of the profession relies.

LLPs bring several advantages over other kinds of partnership:

  1. LLPs are registered legal entities and are therefore capable of contracting in their own name. This means that important assets such as the surgery freehold or lease can be held in the name of the LLP rather than individual LLP member’s names. When a member joins or leaves an LLP, there is no need to change the lease or the land registry title, because the member is not named on it. Discussions amongst members would then change from being whether or not to ‘buy-in’ to the surgery, to whether or not to contribute capital to the LLP.
  2. The liability of LLP members is limited to their capital contribution. There are ways this can be circumvented such as by a mortgagor requiring personal guarantees, but members know that their liability is limited except where they have agreed otherwise. By contrast in traditional partnerships all partners have unlimited liability except where they have agreed to limit it. The most common ways of doing so are to take out insurance (such as professional indemnity cover) or to have contractual limits to liability in service contracts. In this way it is possible to create structures which arrive at similar levels of risk, but they start from opposite extremes
  3. In an LLP a member is not responsible or liable for another member’s misconduct or negligence. This is an inevitable consequence of the limited liability status since this removes the joint and several liability inherent in an unlimited liability partnership. Some argue that this can reduce the level of collaboration between LLP members, but this has not generally been the experience of other professions.
  4. There is considerably more formality around LLPs. Unlimited liability partnerships can be created and dissolved with no documentation, whereas LLPs cannot exist unless they are registered at Companies House. This increased formality eliminates some of the uncertainty around whether a partnership has been created or dissolved, which is at the heart of many GP partnership disputes. However, Companies House requires LLPs to file and disclose information about their membership and accounts which is normally kept private in an unlimited liability partnership.

Mutuals and Social Enterprises

There are a variety of legal structures which enable employee and community ownership of, and involvement in, a business. These are usually known collectively as social enterprises. The only form of social enterprise which is currently open to primary care is a Community Interest Company Limited by Shares (“CIC-CLS”). Since the same ownership rules apply to a CIC-CLS as to an ordinary company limited by shares, it is not possible to use it to broaden employee and community involvement in the practice.

If other social enterprises were to be permitted to hold GMS and PMS contracts, they would most likely include Companies limited by Guarantee (“CLG”), Community Benefit Societies (“BenComs”) and Industrial Provident Societies (IPS).

The primary difference between the various different types of enterprise comes down to who they ultimately seek to benefit:

  • Partnerships and LLPs look to provide financial benefit (profit) for the partners/members
  • Companies limited by shares look to provide financial benefit (profit) for the shareholders
  • CLGs look to provide financial and non-financial benefit to a defined purpose and are often charities
  • BenComs look to benefit the community
  • IPS’s seek to benefit their members

If social enterprises were able to hold GMS and PMS contracts, they would have similar advantages to LLPs. They all generally have legal personality and so can hold assets and contracts, they have limited liability by default, and they are regulated and must be registered. Social enterprises come with the additional disclosure requirement beyond those of LLPs, to ensure that their social purpose is being complied with.

A further possible advantage with social enterprise is that it might make it easier to integrate across other elements of healthcare, since it would be easier to involve the care and voluntary sectors in a social enterprise such as a BenCom.

Transitioning issues

If LLPs and mutuals were permitted to hold GMS and PMS contracts, this would not resolve the question of how to move existing GMS and PMS contracts into them. As LLPs and mutuals are distinct legal entities, they would suffer from the same procurement problem as Companies limited by shares currently do. This is that procurement law states that public bodies must tender all contracts above a certain value. Because GMS and PMS contracts do not generally have a fixed term, their cumulative value normally exceeds this threshold. Since moving a contract from one legal entity to another is technically a termination and re-grant, the re-grant would by default have to occur through a tender process. There are exceptions to the public tender rule, but it is a matter of some debate whether these exemptions can be applied to GMS and PMS contracts.

If you have any questions or for more information, please contact Nils Christiansen on 01483 511555 or email n.christiansen@drsolicitors.com

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What does GDPR mean for GP Practices?

What is GDPR and what does it mean to be compliant?

I am sure that you will all by now be aware of GDPR. GDPR comes into effect on 25th May 2018 and seeks to give individuals more control over how organisations use their data.

GDPR is a European regulation, and automatically becomes law in the UK because of our membership of the European Union. Although Brexit would take us out of the European Union, the current plan is to incorporate all EU law into UK law, so GDPR is almost certainly here to stay.

Confusingly, the UK Parliament is drafting its own data protection law called the Data Protection Act 2018 (DPA 2018). This law will supplement the GDPR and replace the existing 1998 Data Protection Act. The DPA 2018 is still working its way through Parliament so is not finalised. Much of the commentary on ‘GDPR’ combines it with the DPA 2018, and so mixes actual law with a draft bill.

Who does it apply to?

GDPR applies to all individuals and businesses who have responsibility for handling personal data. GP practices are ‘data controllers’ registered with the Information Commissioner (ICO) and are responsible for deciding how and why data is processed.

In our experience, practices have long been familiar with the concepts of data confidentiality, but GDPR requires additional levels of process and control, and forces practices to think about all personal data, not just the confidential health data they hold.

The key to understanding compliance with GDPR is not to see it as a tick-box exercise to be completed by 25th May, but rather as developing and embedding a permanent change of culture, whereby protection of personal data is central to every decision made within the practice. When all staff are able to recognise personal data and make informed decisions about protecting and processing it, and know what to do in the event of a breach, you will be well on the way to compliance.

What can GP practices do to prepare for GDPR?

  • If you haven’t found it already there is a very helpful 12 Steps to Take Now and Data Controller Self Assessment Toolkit on the ICO Website. Given that the ICO is the data regulator, they are the best place to start with your preparation.
  • It is critical that practices can demonstrate that they have sought to comply. The ICO has been clear that they are looking to see reasonable efforts being made. To do this you will need to have identified, documented and explained the legal basis for all the data flows to and from the practice. This is likely to be a time consuming undertaking and will be difficult to do unless you have a member of staff who is familiar with documenting processes and data flows. Remember that this documentation will have to be kept up-to date, so be careful not to outsource all your understanding of this information audit.
  • Data Protection policies and procedures must also be updated. Many practices have historically relied on ‘template’ policies, but these are unlikely to be adequate, as procedures will have to relate to the data flows identified in the information audit.
  • Privacy Notices are another important part of GDPR. These must be displayed prominently, which as a minimum is likely to be on the practice website and the noticeboard. Practices should think hard about opportunities to draw patient attention to these Privacy Notices, since one of the key principles underlying GDPR is transparency about how you deal with data. New information which must be added to privacy notices includes how you intend to use data, and the ‘lawful basis’ for what you are doing.
  • Be aware that much health data falls under one of the GDPR special categories. In addition to the ‘lawful basis’ that all data controllers must identify, practices need to satisfy a second separate condition that the processing is necessary for the purposes of healthcare.
  • Staff training is also an important part of compliance. Practices will need to be able to demonstrate that they have trained all their staff, including Partners, in GDPR and have an ongoing program to ensure that they are kept up to date as the law changes.
  • One significant change is that practices can no longer charge patients for access to their medical records except in exceptional circumstances. This may unfortunately increase the administrative workload as patients and others get used to making ‘subject access requests’. The time limit for dealing with these has been reduced from 40 days to one month.
  • An interesting example of the current uncertainty is the role of the Data Protection Officer (DPO). Under GDPR, it is not at all clear that practices are required to appoint a DPO. However, the DPA 2018 if enacted in its current draft form would certainly require practices to appoint a DPO.

So what happens if there is a breach and what are the risks of non-compliance?

In the event of a data breach affecting patient’s privacy rights, you must notify the Information Commissioner’s Office (ICO) no later than 72 hours after you become aware of the breach. If the breach is likely to present a high risk to their data, the patient must also be informed. You should have a clearly documented process for managing a data breach. This is another example of how proper documenting of processes and staff training is going to be vital.


It is important that practices take ownership of GDPR themselves. Compliance is not really something that can be outsourced, although there are plenty of commentators looking to profit from it. The ICO have made clear that the world will not end on the 25 May 2018 as they realise this is a journey for all businesses and they want to be supportive rather than punitive, but they will want to see evidence that practices are taking data security seriously throughout the organisation.

If you are concerned about your GDPR readiness, then please give us a call and we would be happy to talk through your plans. In our experience, most local medical committees are also aware of what needs to be done and are able to assist members and share good practices on GDPR.

If you would like to discuss GDPR or any other legal matter, please contact Nils Christiansen on 01483 511555, n.christiansen@drsolicitors.com

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Should a GP practice accept gifts and legacies?

Every now and then, a practice might be fortunate enough to be remembered in a patient’s Will or to receive gifts from grateful patients. Research has shown that the proffering of small gifts is relatively common place. Whilst it is obviously nice to be recognised for one’s good work, it does give rise to a number of professional and legal issues.

Professional issues

Good Medical Practice Guidance states that “You must not encourage patients to give, lend or bequeath money or gifts that will directly or indirectly benefit you.” However you “may accept unsolicited gifts from patients or their relatives” provided that it doesn’t affect the treatment you provide.

Whilst this appears to permit the receipt of unsolicited gifts and legacies, there is a big caveat. In each case, you must “also consider the potential damage this could cause to your patients’ trust in you and the public’s trust in the profession. You should refuse gifts or bequests where they could be perceived as an abuse of trust.” This is clearly a judgmental matter which will be easier to balance for a box of chocolates than for a £100k legacy.

Legal issues

The PMS and GMS Regulations are clear that practices must keep a register of gifts from patients or their relatives that have a value of £100 or more. You should record the name, the NHS number or address of the donor, the nature of the gift, its estimated value and the name of the recipient.

The next question which arises is how should the gift or legacy be shared?

To determine the answer to this question, you need to look at both the gift or legacy itself and the partnership deed.

For example, a legacy may be left ‘to the partners at the XXX Surgery’. So has the gift been left to the GP partners individually in equal shares, or left to the partnership to be divided between the partners in their respective profit sharing ratios? Was it intended for the partners in the practice at the time the Will was written, at the time of death or when the legacy is actually received? Alternatively, is it actually intended for the benefit of the patients and therefore shouldn’t be taken as income at all, but rather invested in healthcare within the practice area? Sometimes the intended purpose is clear because the donor has perhaps left a letter of wishes stating how they want the money to be spent or shared. Unfortunately, this is frequently not the case and a large legacy can often be a source of dispute between the partners.


Practices need to be careful about what gifts and legacies they accept and how these are recorded. The larger the gift, the more care needs to be taken.

Remember that this is, at heart, an ethical issue and whatever decision you make, would you be comfortable in justifying it in front of the GMC, or perhaps even a journalist?

For larger gifts and legacies, in addition to recording them in the gift register, we would recommend that you prepare a paper trail setting out your thinking behind the decision you took and any professional advice that you sought.

You would also be well advised to check what your partnership deed has to say about sharing of gifts and legacies to minimise the risk of future partnership disputes.

If you have any queries relating to legacies and gifts, or any other matter, then please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com

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Can you challenge the CQC?

Despite increasing pressure being placed on frontline care teams, the Care Quality Commission (CQC) has revealed that GP practices are providing a consistently good quality of care, with 93% rated good or outstanding.

Practices are also significantly more likely to maintain their rating upon reinspection than other NHS providers.

But what if an inspection takes place and you disagree with its findings? What are your options for challenging the ratings given?

CQC inspections

All GP practices are subject to a comprehensive inspection by the CQC at least once every three years. This consists of inspectors collating information externally and then being on site for a day to observe. Further follow up inspections may also be undertaken, if a particular concern has been raised in a previous inspection.

Inspectors assess all practices on the following points:

  • Are they safe?
  • Are they effective?
  • Are they caring?
  • Are they responsive to people’s needs?
  • Are they well-led?

They also look at how services are delivered to people in specific population groups, such as the elderly, people with long term conditions and those experiencing poor mental health.

‘Evidence’ will be gathered from multiple sources. This may include looking at feedback and complaints, assessing local and national data, speaking to service users and staff, and any insights gained through the onsite inspection. From this evidence, a report and ratings will then be produced.

When can you challenge a CQC report?

Draft report

A draft copy of the report will be sent to the practice and it is as this point that you will be invited to provide feedback on its ‘factual accuracy’.

At first glance, the term factual accuracy may suggest that you can only correct stated facts, such as the number of staff they have recorded. However, in reality this is your chance to challenge all inaccuracies in the report and its findings, including questioning the evidence base and how it has been construed to justify the conclusions drawn.

Time is short. You will only have 10 working days to review the draft report and submit any comments.

Published report

Once a report has been published, you can also ask for a review of the ratings if you feel inspectors did not follow the correct process and procedures. You must tell the CQC of your intention to do this within 5 working days of the report being published.

Drafting your response

While there may be things in the report that you disagree with or feel are unfair, that alone is not enough. Any challenge must be based on specific issues with the evidence and how it has been interpreted, or the process that inspectors have followed.

If you believe a report to be an unfair representation of the level of service you provide, then how you word your response is important.

  • Your aim is to describe why the service provided does not justify the rating it has been given, in relation to the Provider Guidance descriptions. It is therefore important that you refer back to the specific items in the Guidance (available on the CQC website).
  • Don’t worry about fitting your comments within the boxes provided on the form. It is more important that you lay out your case clearly, so feel free to write on a separate sheet.
  • Show you understand the whole process and all guidelines by making reference to The Fundamental Standards, The CQC Provider Guidance and The CQC Enforcement Policy
  • Always avoid including any comments that are emotive (‘this is completely unfair’) or just opinion, (‘it’s impossible with the funding we have’). You need to demonstrate how a different opinion could/should have reasonably been reached by looking at the facts more carefully.

Our recommendations

While it is true that many challenges are not upheld, it is by no means uncommon for challenges to succeed. The key is always in the preparation of the supporting documentation.

If you are unhappy, make sure your concerns are submitted within the deadline. This is difficult in itself as the deadlines are so tight.

We’d always recommend that you prepare fully for the inspection itself, and present the strongest evidence you can. Try to gauge at the inspection itself whether there are any concerns, since you will only have 10 days to respond once you receive the draft report and this is very little time to gather any additional evidence. Then, if you are faced with a report and ratings you feel are unfair and inaccurate, ensure you document your response in the right way.

If in doubt, ask for advice as quickly as possible from an experienced legal team, as they will be able to help you prepare your challenge, giving you best the possible chance of it being upheld.

For more information, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com

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Are you in breach of your GMS or PMS contract?

A GMS contract is a legally binding agreement made between a GP practice and NHS England (NHSE) that sets out certain obligations for both parties. It is the most important asset a practice will hold.

Running to over 270 pages plus lengthy appendices, it is a substantial and complicated document, both to navigate and understand.

Unless a practice has read it from beginning to end, and has very careful monitoring in place, it is likely that most practices will be in breach of their obligations at some point or another – in many cases, without realising.

So, what can practices do to protect their contracts?

Dealing with a breach

There are many reasons why a practice may be in breach of their GMS contract. Some are minor and some more serious.

If you do become aware of a contractual breach, you should rectify the problem as soon as possible and put procedures in place to ensure it doesn’t happen again. You should then assess the impact of the breach.

An example of a minor breach might be a failure to keep the practice leaflet or website up to date. There is not normally any obligation to inform NHSE of these minor breaches, although a practice would be obliged to provide such information if requested. If NHSE were to find out they would probably issue a breach or remediation notice. Once a practice receives two or more of these, NHSE become entitled to terminate the contract on notice, subject to a cumulative impact test.

For more serious breaches, you may be obliged to notify NHSE. In particular you should notify NHSE as soon as reasonably practicable, of­ “any serious incident that, in your reasonable opinion, affects or is likely to affect your performance of your obligations under the contract.”

Whilst this leaves room for ambiguity, a breach would certainly be considered ‘serious’ if it put patient safety at risk. An example of this might be a failure of the vaccine fridge, combined with inadequate records to prove that the no vaccines had been compromised.

Once NHSE becomes aware of a serious breach, they would consider whether to deal with it under the breach and remediation notices procedure outlines above, or possibly to terminate the contract forthwith. They could only do the latter, however, if they could show that patient safety was at serious risk.

There are particular notification requirements for breaches where:

  • a contractor is no longer eligible to hold a contract – for example, if there is no General Practitioner left in the partnership
  • if a partner becomes bankrupt, convicted of a serious criminal offence, is disqualified or suspended, or if a partnership is dissolved

In these instances there is a requirement to notify NHSE, who then need to consider contract termination (although there is not necessarily a requirement for them to terminate).

It is worth noting that while we are talking about GMS contracts in this blog, PMS contracts usually – but not always – have very similar clauses so always refer to your individual contract to be sure.

Our recommendations

We advise practices to familiarise themselves with their core contracts and ensure they understand their obligations. Put systems in place to help monitor compliance and if a breach occurs, attempt to remedy the situation as soon as possible and put processes in place to prevent it happening again.

In the case of more serious breaches, for which practices are obliged to inform NHSE, you should let them know as soon as you can, include an impact assessment, and show that procedures have been put in place to reduce the risk of re-occurrence.

The complex nature of the core contract means it is not always clear whether you might be in breach, nor whether you need to notify NHSE. If you are in any doubt about your compliance, the severity of a breach, or if you have received a breach or remediation notice, then always seek the advice of an experienced legal team.

For more information about managing a breach, or any other related issues, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com

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Can your patient list be ‘open but full’?

From funding cuts, to an aging population and the increasing demands being placed on primary care services, GP practices face ever increasing pressure.

Balancing growing patient numbers with resource constraints can prove a challenge and may lead some practices to consider restricting the growth of their patient list.

Can such a move ever be justified and what could the potential implications be?

The regulations

Current regulations specify that a GP practice must provide:

  • Essential services to all registered patients and temporary residents
  • Primary medical services for an accident or emergency situation happening in the practice area within core working hours
  • Immediate treatment when necessary of any person whose application for inclusion on the patient list has been refused but who is not yet registered with another provider

For an individual to apply to join your patient list, they must live within the practice area, or be entitled to seek acceptance as a temporary resident.

A practice with an open patient list may only refuse an application to join their list if they have ‘reasonable grounds’ for doing so.

Capping a list

Much of the discussion around refusing to register patients focuses on the definition of reasonable grounds. The rules are clear that the following would not be reasonable grounds to refuse: age; appearance; disability or medical condition; gender or gender reassignment; marriage or civil partnership; pregnancy or maternity; race; religion or belief; sexual orientation; or social class.

Examples provided which might be reasonable grounds for refusal include an applicant living in the outer boundary area, or if they have previously been removed from the list – particularly if this was because of a history of violence.

This obviously leaves some uncertainty around the reasonableness of other possible grounds, and some commentators have suggested that staffing shortages and resource constraints would be sufficient grounds to refuse all new applications. This is sometimes known as ‘open but full’ or ‘list capping’.

To informally cap a list by refusing to register new patients, your reason for doing so must be extremely serious. For example, if a practice strongly believes that registering more patients will overstretch its ability to provide the necessary services, it may be arguable that patient safety is at risk. This situation could, in theory, justify a short-term list closure but a practice would be well advised to further justify their decision with some analysis of the risk.

However, should you routinely start refusing to register new patients then you may find yourself on shaky ground. You will need to show you are actively working on a solution, such as seeking help or getting in additional resources, and doing all you can to resolve the problem.

Closing a list

If the problems you are facing are very severe and no short-term solution looks likely, then a formal closure of the list should be pursued. To do so, you would need to make an application to NHSE for their approval to close it for a period of between 3 and 12 months.

Such applications should never be entered into lightly. They require a great amount of detail to be supplied about the difficulties being experienced in delivering services, the help that NHSE may be able to give to alleviate those difficulties and also any discussions that have been had with existing patients.

The regulations do not spell out the exact grounds on which the closure of a list may be justified, but in these difficult times NHS England will likely seek to rigorously challenge your application.

In summary

A practice may potentially justify what amounts to an informal list closure without applying for a formal list closure, if the circumstances are deemed serious enough – such as putting patient safety at risk – and if the problem is perceived as short-term.

However, capping a patient list should only ever be seen as an extreme and temporary measure, as otherwise the list closure process should be followed.

If you’re at all concerned, we would generally recommend you contact your LMC in the first instance to discuss the problems you are facing and see what help and support is available to you.

For more information about practice management, or any other enquiries, please contact Nils Christiansen on 01483 511555 or email n.christiansen@drsolicitors.com  

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Pensions protection scheme deadline approaches

The start of a new fiscal year is fast approaching and with it comes an important deadline for any GP nearing retirement.

If you’ve built up a healthy pension pot, then Individual Protection 2014 (IP2014) is a scheme that could help you reduce, or avoid, a tax liability on your savings. But with an April 5 2017 deadline, time is running out to apply.

What is IP2014?

The lifetime pension allowance was reduced from £1.5 million to £1.25 million in April 2014, then lowered again in April 2016 to £1 million. Any pension savings above this level are taxed at a significantly increased rate.

Since reducing the lifetime limit could be seen as unfair to those who had already accrued large pension pots, IP2014 was introduced to enable such people to safeguard their pension savings and effectively ‘lock-in’ the higher lifetime savings allowance. However, IP2014 is not an automatic right and must be applied for. We understand that significant numbers of GPs who may benefit from IP2014 protection have not applied. The deadline for applying is 5 April 2017.

Are you affected?

If the total value of your pension benefits exceeded £1.25m as at 5th April 2014 you are potentially able to secure Individual Protection 2014. The calculation to perform is:

(NHS Pension x 20) + Lump Sum + Private Pension Fund Value

The problem is that this calculation requires information on valuations from the NHS Pensions Agency and the demands on their time are currently significant. Fortunately the required information should also be available online, but you would be well advised to check soon if you have not already done so as the tax savings can be significant.

Our recommendations

At DR Solicitors, we believe in always seeking expert advice from specialist advisers. We do not advise on tax or pensions, but we do stay current with all the various regulatory and commercial issues which may affect our clients.

If you are concerned about IP2014 or any other aspect of your pension planning you should always seek the advice of a specialist IFA or accountant who understands the intricacies of the NHS Pension Scheme. We are always happy to make introductions to our extensive network of primary care advisers including specialist accountants, surveyors, banks, IFAs and consultants.

For more information, please contact Nils Christiansen on 01483 511555 or email n.christiansen@drsolicitors.com 

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Don’t put your premises funding at risk

Premises funding is a complex area for any GP practice to navigate.

There will be times when you need to obtain prior consent from NHS England (NHSE) in order to secure funding, and other times when you are simply required to inform them of changes.

Failure to seek consent when it is needed or to notify certain changes can put future premises funding at risk, or even result in NHSE looking to recover any overpayments.

To help you understand what is required, we’ve taken a look at some of the most common events in a practice which may have implications on your premises funding and explain what you need to do:

Top trigger events:

1. Partner retirement

If an owning partner retires and is not bought out, he/she will cease to be an owner-occupier.  This has implications if you are in receipt of notional rent, which is only available to owner-occupiers.  In this situation, it’s best to inform NHSE well before the retirement date to confirm that they will continue paying notional rent for the whole building, while at least some of the partners remain owner-occupiers.

2. Refinancing 

If you are in receipt of cost rent (borrowing cost funding) then you must make an application in writing to NHSE if you are looking to change your mortgage lender, or advise NHSE following a change in the rate of interest you are being charged.

3. Premises development 

If you’re planning any building works for the development of your premises, then you must not start work without first agreeing the work with NHSE.  Similarly, if you are purchasing a property with a view to using it as a surgery, then don’t sign anything binding, such as a purchase contract, without the prior agreement of NHSE.  In both these scenarios, if you proceed without prior consent, NHSE are within their rights to refuse to consider any subsequent grant or funding application.

If you receive any tax allowances when developing your premises, these must also be disclosed to NHSE, who may off-set them against any premises development or improvement grants.

4. Sale and leaseback 

Before agreeing a contract for the sale and/or leaseback of the surgery to a third party, ensure that you have confirmation from NHSE that they are in agreement with the arrangement. NHSE is not permitted to fund the rent reimbursement unless they have agreed the contract before it is signed.

5. Registering for VAT 

If your practice is VAT registered – or you are considering registering – then you must disclose any relevant recovered VAT to NHSE so they can off-set such sums against your premises funding. 

6. Rent review

Unlike most other applications for premises funding, rent reviews do not have to be agreed with NHSE in advance. In fact, you will first need to agree the rent review with your landlord, before seeking NHSE’s agreement to reimburse the new rent.  Clearly, this leaves the practice at risk of a shortfall if NHSE do not agree with the amount of the new rent. This was a change introduced in the 2013 Directions and it continues to be controversial.

7. Lease renewal

NHSE needs to confirm that any new or varied lease represents ‘value for money’.  All new and varied leases should, therefore, be sent to NHSE for their approval before they are signed.

8. Practice closure

Premises funding is tied to your GMS or PMS contract. If you close your practice, your premises funding will cease on the day your contract terminates.  Your building related obligations will, however, normally continue. The mortgage must still be paid, the rent paid, and the heating system maintained. If you have received development grants, these may have to be repaid at least in part. Some leases permit the building to be sublet, but if not you may well be tied in for many years with no possibility of an income stream to offset the rent. We have written more about this issue here.

9. Mergers

Practice merger discussions often tend to focus on the partnership elements, and ignore the premises. This is usually justified because ‘the buildings will stay as they are’ or ‘the buildings will be outside the new partnership’. This may seem like a simple solution, but can create multiple problems for the future which we will be considering in more detail in a future article. Specifically regarding the premises funding, it is common for mergers to change the legal nature of the occupancy of the surgery, perhaps by creating an undocumented lease arrangement where none existed before. Even where such arrangements are undocumented, they would normally still require the prior approval of NHSE.


The Premises Costs Directions require that you must give NHSE any information they ask for and may need, in order to accurately calculate the amount of financial assistance to be provided. If you are in any doubt as to whether you need to notify NHSE or not, we’d always recommend that you seek professional legal and/or surveyor advice.

For more information about premises funding, or any other enquiries, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com  

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The Benefits of a Social Enterprise versus Profit making Company

In our recent blog, Where will future practice income come from?, we explained how additional income is unlikely to come from your core GMS/PMS contract. As a result, many GPs are looking to supplement their income from other sources; from their CCG, from the local authority or in other ways.

It looks like the majority of new public money available to primary care will be funnelled through practices working together; the NHS Five Year Forward View, Vanguard monies and the much promised – but yet to be delivered – ‘premises’ money are all strongly suggestive of this. This is one trend in healthcare which seems likely to continue.

If you’re looking at working together with other practices, the chances are that you are either already a member of, or are considering setting up, a GP federation or a GP Network. In this first article in a series of articles linked to GP practice income, we will be looking at the benefits of running this as a social enterprise versus a profit-making company.

Introduction to social enterprise

Most GPs will be familiar with the traditional, profit-making enterprise, where the shareholders each receive a share of the net profits to spend as they wish. In contrast, many GPs know relatively little about social enterprises and their benefits, although they may be under some common misconceptions.

Working for a social enterprise does not, as is sometimes assumed, mean working for free. Everyone working in the business will be paid the going rate for providing their services, and suppliers all get paid in the normal way. Consequently, for most people, there is no practical difference between working for a social enterprise and for a profit making business.

The key is that any ‘surplus profit’ once all the costs of the business have been settled must be invested into the ‘social purpose’ as defined in the objectives of the company. Furthermore, if the business is wound up, any remaining assets would also need to be re-invested back into the social purpose. The precise definition of ‘surplus profit’ and how it can be spent is determined by the type of social enterprise. We will be looking at these different types in another blog post.

While the terms ‘non-profit making’ and ‘social enterprise’ are used interchangeably, it is important to note that a social enterprise can make a profit, and indeed it can be possible for some of this profit to be returned to investors in the business. It’s just that ‘surplus profit’ must go towards supporting the social purpose.

The practical implications and benefits of social enterprises

There are a number of potential advantages to running a healthcare practice as a social enterprise:

  • Social engagement is much easier

    Community support for social enterprises can be stronger as the business is seen to be working for a good cause, rather than for the investors. Local people may be more willing to contribute their time by volunteering or fundraising; the general feeling of goodwill may attract more patients through the door; there may be fewer complaints as people feel a degree of ownership, and; employees may show more commitment.

  • Access to alternative sources of finance

    Healthcare practices are traditionally financed through a combination of NHS funding and bank loans. Social enterprises may be able to supplement these with other sources of funding from ethically minded individuals or organisations who are happy to provide capital as a gift or at below market rates since they know that the ‘saving’ will be locked into providing the social purpose rather than extracted as additional profit by the business owners. Examples include community fundraising, crowdsourcing, bequests and legacies, and trust fund grants.

  • More opportunities for joint working

    It is widely understood that the future of healthcare must lie in better integrating primary care with secondary and social care and that GPs are key to coordinating a patient’s ‘healthcare journey’. The challenge is how to get such a disparate variety of participants to successfully work together. Trust is at the core of any working relationship, and some, if not most, of the necessary healthcare professionals may feel more committed to joint working for a social enterprise where ‘going the extra mile’ has a more direct impact on the community.

  • Reduced risk of disputes between business owners

    Social enterprises can be ‘owned’ in a variety of ways. Common methods include limited company shares and membership subscriptions. The most appropriate method depends partly on how widely you wish to spread ownership (e.g. a small group of GPs, all local health workers, or all patients?) Since social enterprises have minimal to no value to the owners, there is no goodwill to be valued and none of the resulting arguments between shareholders over the value of their investment on leaving the company. If someone wants to leave they are more likely to simply leave and take their services elsewhere.

  • Preferential treatment?

    Although CCGs and other public bodies are not currently allowed to prefer social enterprises in       procurement, they are able to set selection criteria such as ‘demonstrating community involvement’ which social enterprises may find easier to meet.

In conclusion

Social enterprises hold many apparent advantages in the primary care sector. Since most costs are simply salary costs, healthcare is anyway not normally a sector which generates large ‘surplus profits’. For this reason, the ‘benefits’ of social enterprise can be accrued without the ‘cost’ of losing access to the (non-existent) surplus profit. These benefits include inviting trust from the local community which should hopefully result in better health outcomes.

If a GP federation or Network is set up as a social enterprise, the owning GP practices can remain as profit making partnerships and still be paid by the federation/network for the work they do in the normal way. The GP federation/network will then engage with the local community and with other health and social care providers to become a true ‘multi-speciality community provider’ as envisaged by Simon Stevens in the Five Year Forward View. 

The bottom line is that social enterprises remain a little misunderstood. If you’re considering setting up or becoming a social enterprise, it is important to seek appropriate advice on the implications and on the legal entity.

DR Solicitors has already helped numerous GPs establish an operating vehicle for their joint working (GP federations and Network Companies), some of which have been established as Social Enterprises. Please contact Daphne Robertson or Nils Christiansen if you would like to discuss your joint working plans. We would be delighted to hear from you.

For more information about GP networks and federations and any other related issues, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com