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.
Conclusion
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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Is your practice prepared for the changes to IR35?
Significant changes to tax legislation IR35 are likely to come into force from April 2017. These changes have implications for any practice that engages workers, such as locums, through their own companies.
Here’s what you need to know:
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Are you liable for a ‘hidden retirement tax’?
If you’re a partner in a GP practice that owns its own premises, you may not be aware of the tax liability that could arise if you retain your share in the surgery when you retire.
Stamp Duty Land Tax (SDLT) was introduced in 2003 and is payable on the transfer of an interest in a property. Chargeable transfers include introducing and removing the surgery from a partnership. This is regardless of whether any changes in ownership need to be notified to the Land Registry or whether any of the other partners buy in or out.
The tax itself will form part of your self assessment meaning it is your responsibility to declare it, and can amount to almost 5% of the surgery market value.
Since it is increasingly common for GPs to retire from partnerships whilst retaining a share of the surgery, we estimate that many hundreds of GPs will, over time, have become liable to pay SDLT. Many may be unaware of this liability, but the consequences of non payment can be severe. In addition to any overdue tax HMRC will levy fines and interest, and if they consider that you have deliberately not paid will look back up to 20 years.
What is SDLT?
SDLT is a tax you need to pay if you buy an interest in property or land over a certain price in England, Wales or Northern Ireland. The current SDLT threshold is £150,000 for non-residential land and properties.
When do you need to pay SDLT?
You become liable for the tax when you:
- buy a freehold property
- buy a new or existing leasehold
- transfer an interest in land or property, including transfers into and out of partnerships
Is there not a Partnership Exemption?
You may well have heard that there is an SDLT exemption for partnerships. Whilst it is true that most intra-partnership transfers are exempt, you need to be certain that every transaction qualifies. Introducing and removing a building to/from the partnership are certainly not exempt, and even transferring shares between partners can be chargeable if, for example, the surgery was recently introduced as a Partnership Asset.The key point to understand in order to determine any liability is whether or not the surgery is held as a Partnership Asset. If you retire with some or all of the Partnership Asset you will be treated as a purchaser for the purposes of SDLT.
How do you calculate the tax?
Unfortunately this is not simple. SDLT for partnerships is calculated very differently from ‘normal’ property transactions, and is not a straightforward percentage of the market value. The calculation can involve changes in income profit shares going back 13 years and requires specialist knowledge.
Think you may be liable?
If you are planning to retire soon and are considering holding onto your share of the surgery, SDLT is something that you should take into account in your financial planning. Given enough time, you can make plans which manage your liability.
If you are a retired Partner and think you may have a historic liability, please get in touch. The partnership SDLT team at DR Solicitors is one of the most experienced in the country, and can help you understand where you might stand in relation to this issue.
For more information, please contact Nils Christiansen on 01483 511555 or email n.christiansen@drsolicitors.com
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Bank Holidays – how to ensure all partners have a happy New Year
Most GP partners will have enjoyed some much needed time off over the Christmas and New Year period and it won’t be long before the next bank holiday arrives. One question which we are frequently asked is how partnerships can fairly apportion bank holidays so that part time partners don’t miss out.
The challenge
Because the majority of bank holidays fall on a Monday or Friday, a part time partner who does not usually work on either or both of these days may feel they are unfairly ‘losing out’ on any benefits their full time partners receive in relation to bank holidays.
For example, in a job share where partner A works Monday and Tuesday, and partner B works Wednesday to Friday, in 2017 seven bank holidays will fall when partner A is scheduled to work, whilst only one bank holiday will fall on a day when partner B would otherwise be working.
So, how can you best manage this issue?
Your options
Because partners are not employees, there is no statutory right to paid bank holidays. How you choose to deal with bank holidays is a commercial decision to be decided between the partners. However, to avoid a potential claim of discrimination, you should ensure that part time partners are treated no less favourably than full time partners and it is sensible to ensure that any scheme you do put in place is fair.
So, what are your options?
- Pro rata entitlement – One route you can take is to add all holiday leave and bank holidays (based on a full time partner) together, then calculate the total leave entitlement pro rata, based on the number of days to be worked. Everyone then gets an equivalent total amount of leave but the problem is that the bank holidays are fixed days so part timers working on a Monday will have less discretion over their days off than those working on, say, a Wednesday. If you regard this as a problem, you could come to an agreement whereby, for example, any partner forced to use more than a given percentage of their total leave allocation on bank holidays is given an additional day of paid leave.
- No adjustment – A less popular option, but one which is followed by some partnerships, is for there to be no adjustment at all for any part time partner. If a bank holiday falls when you are scheduled to work, then lucky you and bad luck if it doesn’t fall on your scheduled day! The problem with this option is it may become hard to persuade part timers to work mid-week.
- Profit Share adjustment – an alternative mechanism is to calculate profit shares based upon actual sessions scheduled to be worked. Since bank holidays are known in advance, the profit shares can be adjusted to account for them. This is a complicated option leading to small annual changes in profit shares and is, therefore, unusual.
Conclusion
Whichever option you choose, the most important thing is to ensure that it is clearly set out in your partnership deed and, of course, that your partnership deed is up to date and valid. Older partnership deeds, in particular, tend not to cater well for part time partners.
Without a valid partnership deed, there will be no formal entitlement to leave of any kind and no clarity – for example, on what you will earn when you are absent, or who should pay for locum cover.
Our handy checklist 8 signs that your Partnership Deed needs an update may help you decide if it’s time to update your old deed.
Our recommendations
In our experience, rolling all holiday leave and bank holidays together to generate a pro rata entitlement can work well. However, as we’ve already mentioned, ultimately it is a commercial decision that needs to be taken by partners working in the best interests of the practice.
For more information about partnership deeds, or for any other enquiries, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com
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How to set up a successful GP federation
GP federations are a way for practices to work together, with shared responsibility for delivering high quality and patient-centric services to the local community.
Their popularity is on the rise and with most CCGs supporting the concept, many practices are being encouraged to consider going down this route. But before doing so, there are some key issues that need to be addressed. The most important of which, is why do it?
To be successful, you firstly need to understand what the purpose of the federation is going to be. For most, it will be to provide services on a scale that a single practice could never achieve. For example, covering a wider geographical area, or larger population. Often one practice alone will not have the skills set or resources needed to deliver this or to afford the investment it may require.
Once you have established the federation’s purpose, you need to find a group of like-minded practices, who share your vision and will be a good ‘fit’ to work with.
The business model your federation will follow is another key issue to address. Many of the federations we work with, choose to create a limited company with shareholders. The reason being that it offers a lot of flexibility is well understood and they will benefit from limited liability. In addition, if it has been structured correctly then the limited company will be able to hold GMS and PMS contracts, and provide NHS pensions to its staff and officers.
A main alternative route would be to set up a limited company as a regulated social enterprise (such as a Community Interest Company). For more advice on these two options and what the implications may be, see our blog The Benefits of a Social Enterprise versus Profit making Company
Organisational structure
The usual structure followed by a GP federation will be for shares in the limited company to be held on trust for the member partnerships, by one partner from each practice. It’s important that this relationship is documented in the partnership arrangements of each member practice.
Typically, the capital contributions, dividends and the value of each share will be linked to the size of the practice list. Other models are available, such as the number of partners, but are far less common. Voting rights may also depend on list size, but more typically they will work on a vote per practice, or follow a weighted voting structure.
Directors of a federation
Directors needed to be appointed who will act on behalf of the federation – not solely in the interests of their own member practice. These directors should be chosen by the shareholding practices. For smaller federations, there will often be one per member practice, but in larger federations, this isn’t normally advisable as it can become unmanageable.
Most directors will be drawn from the partners in the member practices, but this does not need to be the case. Some of the more successful federations look externally to hire in experienced directors, with the aim of helping to drive the federation forward. This does, however, come at a cost.
Rules and rights
It’s important to draft a shareholder’s agreement which will set out all the rules for any important matters, such as joining and leaving the federation, valuation of shares, voting rights and processes, restrictive covenants and delegation of responsibilities to directors.
Another aspect that needs documenting is the relationship between the member practices and the federation. Usually, the federation will hold the contracts with the commissioning body (such as the CCG, local authority, or trust). These contracts will then be delivered by the member practices. One benefit of this is that the federation will have no need for employed staff and if it isn’t providing the services itself, it won’t require CQC registration.
A disadvantage is that the relationship between the practices and the federation will be quite complex, because you need to think ahead and plan for any potential problems that may arise. The commissioning body would look to the federation if there is a problem with delivery, who in turn would look to the practice. This means there needs to be a documented sub-contract relationship and any contract held by the federation needs to permit this.
It can also cause problems for pensions from the associated income being passed through the federation, so you need to take specialist advice in this area. Additionally, it is important to think about who needs to hold professional indemnity insurance.
The secret of success will always come down to thorough planning and having the right professional advice to ensure you navigate the complexities of the process and protect your interests.
For more information about forming a GP federation, or for any other enquiries, then please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com
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Is a Super Partnership right for your GP practice?
How GP practices can best work together at scale to deliver effective care has been the subject of much debate in recent years. Traditionally, when practices worked together it was more informal and mergers may have involved just one or two practices. However, one model that has emerged and continues to grow in popularity, is the so-called ‘super partnership’.
The term generally applies to multiple practices who merge, or choose to work as, a single entity. Some of the largest super partnerships contain over 100 partners and provide care for over a quarter million patients.
So, why are more and more practices considering this route?
Benefits of a super partnership
Joint working in this way offers many potential benefits for practices, mainly due to economies of scale. These can include:
- Increased role specialisation
- Shared services, such as HR and finance
- Negotiating lower prices when purchasing goods or services
- Shared cost of investment, for example in premises, technology, staff and services
- The potential to increase income by bidding for larger contracts and additional services
- A strong single ‘voice’ on all important matters affecting the practice and patients
- Support with issues of recruitment and retention, as the scale of a super practice can provide a broad and varied career ladder
What are the options?
Although every super partnership will be unique, we discern two main models for how a super partnership forms and operates:
1. Centralised partnership
This is a partnership which effectively operates as a single unit. Each practice will be responsible for managing their own costs, but most other things will be shared.
Common features of this type of partnership include:
- GMS/PMS contracts will transfer to the super partnership and merge together
- GMS/PMS contracts cannot be easily be attributed to a practice
- It will operate with a single set of accounts
- There will be a full sharing of profits, usually based on scheduled sessions
- There will be a sharing of costs and staff, who will transfer to the super partnership
- A cost centre manager based at each surgery will report to the super partnership
- The partners have full joint and several liability for the partnership, regardless of which practice they work in.
- All partners will be subject to the same partnership terms
- There is usually a management board of partners who have reduced or no clinical responsibilities
- No automatic right for a practice to withdraw
2. De-centralised partnership
In contrast, under a de-centralised partnership, each practice will operate as a separate business unit and be highly autonomous.
Common features are:
- The GMS/PMS contracts will transfer to the super partnership but won’t be merged so will be directly attributable to each practice
- Surgery buildings will be kept separate, with licences to occupy put in place
- The accounts will largely be kept separate with a very limited sharing of profits
- Each practice will retain the ability to ‘hire and fire’ staff
- Cross Indemnities will limit joint and several liability
- Separate policies for issues such as profit share, sessions and absence for each practice
- Shared control over partner admission and expulsion
- A Management Board exists, but the roles are not usually full-time and comprise elected partners who still retain clinical responsibilities
- Individual practices will have the right to withdraw
Key issues that need consideration when deciding whether to join a super partnership include concerns over surgery premises, tax implications, pensions, the sharing of information and the type of organisational, contracting and legal model that will be followed.
Overall, it is a complex process which requires a great deal of planning, so always seek the advice of an experienced legal team to ensure your best interests are protected and to help ensure your objectives are met.
For more information on this issue, please contact Nils Christiansen on 01483 511555 or email n.christiansen@drsolicitors.com
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Planning to retire? Don’t forget about your lease liabilities
If you’re a partner in a GP practice and have decided to retire, then there are many issues that both you and the remaining partners need to consider. Making a smooth exit is likely to be top of your agenda and one important area that can often be overlooked is dealing with lease obligations.Your responsibilities will vary depending on how the lease is ‘owned’. Here, we examine three of the most common scenarios and what the implications may be, along with offering advice on how best to mitigate any liabilities.
1. Named at Land Registry
If your lease term is for a period of seven years or more, then it should be registered at the Land Registry. It is also possible to register leases of a shorter term, although this is rare.
Leases registered at the Land Registry are available to the public and show you as having rights and obligations associated with the property. Public bodies and other third parties with an interest in the property may, therefore, look to you and the other named parties to meet any obligations that arise.
When you leave the partnership, assuming you are also intending to leave your lease liabilities behind, it is important that you sign a TR1 to remove your name from the Land Registry and transfer the title to an ongoing member of the partnership. There can only be 4 people named on the Land Registry title at any one time, so if there are more than 4 ongoing partners they will have to agree who gets to replace you.
2. Named tenant on the lease
If you are named on a lease or have taken over the lease by way of a formal assignment, then the landlord will look to you and the other signatories as joint tenants. You will have responsibility for fulfilling all obligations under the lease and your liabilities will be unlimited – unless you have agreed anything different with your landlord. If any problems arise, such as unpaid rent, required repairs or dilapidations, the landlord could potentially sue you to put things right. Unlike the Land Registry title there are no restrictions on the number of signatories to a lease, so all the partners will usually sign the lease in order to share risk equally.
Once you leave the partnership, you will have little control over what happens to the building, and if your name remains on the lease you cannot easily manage any risk. You will normally want to sign a Deed of Assignment as soon as possible.
A landlord, by contrast, will typically want a minimum number of partners named on the lease at all times so that he can hold as many people as possible personally liable. This can be an issue, particularly in smaller partnerships with recruitment problems, and is commonly known as the ‘last man standing’ problem. There are several ways to mitigate the problem, but it is always advisable to seek legal advice at an early stage if you think you may be facing this situation.
3. Tied into the lease via the Partnership Deed
A partnership deed will typically document a trust relationship, which seeks to ensure that those partners who are not named at the Land Registry or on the lease, will still have the same rights and obligations as those partners who are. This helps ensure everybody is treated equally. Some partners will, therefore, find that they are able to retire without having to notify either the land Registry or their landlord.
However, just because you retire doesn’t mean that any obligations under the partnership deed will end. It is important when leaving a partnership, to understand what you are responsible for and whether the partnership deed permits you to be released from these obligations.
If you don’t have a valid partnership deed, or it is unclear about this issue, then the safest course of action is to draw up a deed of retirement, which will document which past and future obligations you are released from.
In the event that it proves impossible to eliminate all liabilities associated with the lease, another option would be for the partners to provide each other with indemnities against any claims. Just be aware that such indemnities need to be very carefully worded, as they are often contested when one party seeks to enforce them.
Other considerations
Dealing with lease obligations is just one of the many areas that need consideration when you retire. For more expert advice on what to think about and the steps you can take to cover off your risks, see our Retirement Planning Checklist.
For more information about any of the issues covered here, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com
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Are you overpaying your landlord?
The issue of NHS premises funding is a complex area which is often misunderstood by GP practices. This confusion sometimes results in practices inadvertently overpaying their landlord.If you don’t own your own surgery then you must be occupying it on some form of tenancy basis, – whether that agreement is in writing or not – and you should be receiving rent reimbursement. Here we take a closer look at what rent reimbursement is supposed to pay for, and how you should be managing it.
Understanding rent reimbursement
Rent reimbursement comprises two parts:
- the rent
- a contribution to the repairing and insuring of the building – commonly referred to as the ‘uplift’
The rent element is normally the same as the rent agreed in your lease, and practices will often pay this straight to their landlord. The uplift element will vary, but is usually between 5% and 7.5% of the rent, with the amount being determined by the terms set out in the lease.
The uplift may be paid to the landlord or retained by the tenant, dependant on what is stated in the terms of the lease. This is the element which most commonly gives rise to confusion
The uplift
The uplift is a contribution towards the repair of the exterior and structure of the building, along with the cost to insure it. To determine who should receive the uplift monies, you need to be clear about who is responsible for which aspects of the building.
Some common situations are:
1 – The practice occupies the entire building
If you occupy the whole building, you are likely to have a full repairing and insuring lease. In this situation, you will be responsible for dealing with all the repairs, so the practice should keep the uplift.
If your lease only requires you to repair the internal parts of the building, then the landlord should probably receive the uplift element as part of their rent. They will have responsibility for repairing and insuring the exterior and structure of the building, without any additional costs being passed on to you as tenant. Practices often assume that this is the case when the occupation is undocumented, but be aware that your landlord may see their responsibilities vey differently!
2 – The practice occupies part of a shared occupation building
If you share occupation of a building with other tenants (known as a ‘lease of part’) it is likely that your landlord will be responsible for managing all repairs to the building and will then pass on the cost of these to you through a service charge. In this scenario, you should keep the uplift but regard it as a contribution towards your service charge. Since the uplift is a fixed amount, you may also want to talk to your landlord about capping the level of service charge that can be demanded.
3 – No formal agreement in place
A third scenario, which is relatively common for GP surgeries, is for there to be no written agreement in place but for the landlord to historically have repaired the building. In this case, there is a good argument that the uplift monies should be paid to the landlord. However, in the absence of a lease or other contractual agreement, there is scope for an expensive dispute to develop. A starting point would be to see what you have historically paid over.
4 – Occupying a surgery owned by former partners
Some practices may be occupying a surgery which is owned by former partners. Sometimes the current partners in such practices will receive notional rent and pay that money across to the owners. However, that is a mistake. The correct course of action would be to notify NHS England and move to a formal lease and rent reimbursement. By not doing so you could be putting your premises funding at risk and in extremis NHS England could demand the return of monies paid incorrectly in the past. You are also likely to be paying the wrong amounts of money to the owners and former partners.
Disagreements and disputes surrounding funding can typically come to the fore when a lease is being prepared for the first time and it has historically been unclear who paid for the structural and external repairs to the building. To help you navigate such issues, it is always best to seek the advice of an experienced legal professional.
If you are in any doubt about your practice’s position or responsibilities in regards to funding, repairs and service charges, then please speak to us for some initial advice. Contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com
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GP practice funding: What you need to know about the District Valuer
Most GP practices will come into contact with the District Valuer Service (DVS) at one time or another. The DVS plays a key role in issues surrounding GP premises funding and has the potential to significantly impact on a surgery’s finances. There are many reasons why a practice and the DVS may cross paths, including: notional rent reviews, practice valuations and in relation to proposals for significant building works. What’s important to remember is that the DVS is working to protect the interests of NHS England, not your practice.
In this blog, we take a closer look at the DVS, what it is responsible for and the steps you can take to strengthen your position when faced with any negotiations.
What is the DVS?
The DVS falls under the specialist property arm of the Valuation Office Agency (VOA). It provides independent valuation and professional property advice to bodies across the entire public sector, and where public money or public functions are involved.
What does the DVS do for Primary Care?
One of the key roles of the DVS is to advise NHS England on whether the financial dealings of a GP practice represent value for money. It does this in accordance with the 2013 Premises Costs Directions, which apply to all new applications for funding. (For any funding that falls under the 2004 directions, its functions are slightly different, but for this article we will focus on new applications made under the 2013 directions).
The main responsibilities of the DVS include:
Notional rent – Setting the level of notional rent and agreeing to any supplements.
Purchase price – Ensuring that the amount being paid for the purchase of new GP premises is a fair market price.
Premises development – Assessing proposals for significant premises developments (such as the building of an extension), or the construction of new premises.
Sale and lease back arrangements – Ensuring that the sale price and lease arrangement offers good value for money.
Financial assistance – Approving financial assistance towards running costs and service charges.
Grants – Ensuring any grants being offered by NHSE are good value for money, including premises improvement grants, mortgage redemption or deficit grants, and grants relating to the cost of converting back former residential property.
Minimum sale price – Where a guaranteed minimum sale price for surgery premises has been agreed – such as in areas of high deprivation where property values are low – the DVS will advise NHSE on an appropriate minimum sale price and ensure that any sale agreed below that price represents a realistic market value.
Rent reimbursement – When a leased surgery may be entitled to rent reimbursement, the DVS will advise NHSE on whether the proposed terms of a new or changed lease represent value for money. It is therefore necessary that you obtain NHSE approval before any lease is signed or varied.
How can you protect your interests?
For any practice, securing the best possible deal from any funding negotiations is a top priority. One of the most effective ways to protect the interests of the practice and ensure you don’t miss out financially, will be to call on the services of an experienced healthcare surveyor. They will be able to conduct an independent review of the DVS’ conclusions and negotiate on your behalf.
It is also advisable to seek specialist legal advice from the outset, to help you navigate the complex processes and procedures that surround lease agreements, premises development and all other related issues.
For more information about GP funding, lease negotiation, or any other issue associated with GP practices, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com
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Should you promote a non-GP into your partnership?
The changing nature of running a GP practice, with all its pressures and complexities, means that most GP partnerships now recognise the need and benefit of having skilled managers supporting them.
One area where this is having a noticeable impact is within the structure of GP partnerships themselves. While it is still relatively rare, it is becoming more common for non-GPs- such as nurse practitioners, business managers or practice managers – to be offered partnership.
There are many reasons why a GP partnership may consider going down this route and it can have potentially broad-reaching benefits for a practice. Here, we take a closer look at what those benefits may be, along with the key legal issues that can arise.
Key benefits
Motivation & commitment
- For a manager, the offer of a partnership may be seen as fair reward for their enterprise, commitment, and business acumen
- Promoting a manager may help you retain a key member of staff
- It can incentivise and motivate employees as it demonstrates a clear career path
Practice profitability
- Being the part-owner of a business rather than an employee can have a positive effect on perspective, encouraging a manager to think about the future and long-term viability of the practice
- Partnership provides a direct link between income and the overall financial success of the business, which can incentivize a manager partner to help maximize profitability and find new sources of income for the practice
Stronger partnership
- It can bring greater stability to a partnership, as the more partners there are, the less likely you are to face the ‘last man standing’ issue
- It can change the dynamics of a partnership for the better
- A manager may also introduce equity to the Partnership when he/she joins
Legal issues to consider
There are many legal issues that need to be considered before an offer of a partnership is made or accepted. It is also worth noting that a non-GP partner cannot be left as the ‘last man standing’, as they cannot (in most circumstances) hold the medical contract. So generally speaking you will always need at least one GP or other appropriate clinician to be part of the partnership.
Here’s what else you need to think about:
Personal liability: A full non-GP partner would assume unlimited liability for the debts and liabilities of the practice because he or she would be an owner of the business.
Practice insurance: Whilst a GP partner currently secures 100% indemnity insurance in respect of clinical claims, a non-GP partner would risk being sued if their responsibilities are not adequately documented. Therefore, the practice needs to ensure it is adequately insured.
Employment rights: These do not apply to profit-sharing partners because
they are independent contractors, not employees. Partners are not automatically eligible for authorised leave such as parental, maternity and paternity leave, or for the remedies for redundancy or unfair/constructive dismissal unless the partnership deed says so. An employee promoted to partnership would lose these rights.
Tax: As a profit-sharing partner, a non-GP partner would be classed as self-employed so would have responsibility for paying their own tax and national insurance contributions under Schedule D.
Pension: A non-GP partner can be part of the NHS pension scheme, and will join as whole time officers. Employees should take specialist IFO advice to ensure they understand this point before committing to the change in status.
Surgery premises: Will you require the manager to buy in? If so, contact your mortgage provider and any landlord (if applicable) to get their consent and check on any additional requirements. You will want proof of the person’s financial standing before they buy in.
Partnership deed: This would need to be amended to include the non-GP partner. The obligations clauses should ring-fence their exposure to non-clinical issues and responsibilities. You may also consider adding an indemnity from the other clinical partners, in respect of all other third party claims.
Areas of management/voting rights: You may consider limiting the manager’s liability to non clinical areas, such as finance, HR, premises management, IM&T, and data management, and potentially to restrict their voting rights to these areas.
One alternative, if you decide that a full profit sharing partnership is not going to be right for you, would be a so called “salaried partnership”. This offers a middle ground, whereby the non GP manager will continue to be employed as a staff member, whilst enjoying the status of partnership. They will retain all their employment rights with none of the risks or responsibilities associated with unlimited liability.
As with any major decision regarding your practice, it is always vital that you ensure that all parties involved are fully aware of the legal considerations and other implications before any formal steps are taken.
For more information about GP partnerships or any other issues associated with GP practices, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com