Paul Conlan (GP Surveyors, Operations Director) explains the options your practice has to fund premises improvements and highlights the pitfalls to avoid.
It has been widely reported that many GP practices are currently struggling in inadequate premises that need improvement or expansion. According to respondents of the most recent BMA GP Premises Survey, only half of practices consider their premises to be fit for present needs. With many practices highlighting their need for more space.
Whether your practice is considering extending your premises, improving access for disabled patients or simply fitting rolled vinyl, the most cost-effective way to fund the works can be complex and confusing.
Funding options
There are two options available to owner occupied surgeries looking to fund premises improvement works, NHS funded and self-funded (including borrowing capital). Often, works are funded by a combination of these two options.
NHS approval
When undertaking any improvement works one fundamental principle applies. In order that your works qualify for NHS rent reimbursement, you must get written approval from the NHS, including confirmation works will be eligible for rent reimbursement.
To what degree will the NHS fund improvement work?
As part of the 2018/19 GP contract negotiations, 100% NHS funded premises improvement grants are now available, lifting the 66% cap stated in the Premises Cost Directions (PCD).
The level of funding your surgery is eligible for will depend upon a multitude of factors and respective contributions will need to be discussed with the NHS during the approvals process.
Notional rent abatements
If your practice opts to receive NHS funds towards the cost of building or refurbishment work, your surgeries notional rent will be subject to an abatement. Your notional rent figure will be abated proportionally to the percentage of funding the NHS have contributed toward the works. No matter the percentage of NHS contribution the abatement section of the PCD should be followed.
How long will the notional rent abatement apply for?
As the works will be completed after 1st April 2013, the 2013 Premises Cost Directions will apply. The 2013 PCD stipulate a proportionate time scale for the abatement, dependent upon the total costs of the improvements:
- Works costing up to £100,000 – are abated for 5 years
- Works costing between £100,000 – £250,000 – are abated for 10 years
- Works costing more than £250,000 – are abated for 15 years
For further information on notional rent abatements please read our abatement guide.
Can your practice still challenge an abated notional rent figure?
Providing you haven’t signed up to an alternative agreement (waiving your rights to receive rental uplift on works), your practices abated rent is still eligible for checking and challenge. Ask a specialist primary care surveyor to check your figures to ensure your surgery isn’t underfunded.
Funding your own works
If your surgery has or can borrow the capital to fully fund an extension or refurbishment works, it is still imperative that you obtain approval from the NHS before undertaking any works. Gaining the NHS’s approval will ensure any works to your practice will be eligible for notional rent reimbursements.
Is third party input required?
Working out the most cost-effective way to fund your surgeries improvement works, over the lifetime of a notional rent abatement or a loan can be complex. Calculating the increase that improvement works will have on your notional rent and the capital value of your surgery is a specialist area. If your surgery is planning improvements it is advisable to seek valuation advice from a specialist primary care surveyor.
