Questions and answers on the 'Directions'. Previously available as a downloadable PDF document.
Updated 30 May 2006.
No, only payments to GMS practices. PMS practices are dealt with on a separate contractual basis although the vast majority of these follow the same principles as those laid out in the 'Directions'. For GMS practices the 'Directions' cover premises developments or improvements; professional fees and costs incurred in occupying new or significantly refurbished premises; payments relative to the relocation of the GP practice; and payments in respect of recurring premises costs.
Yes, paragraph 6 (of part 1) makes the point that financial assistance may be provided in circumstances beyond those covered by the 'Directions' and gives examples of such circumstances (temporary decant accommodation, emergency costs etc). As with other funding, this is subject to approval and prioritisation.
Paragraph 6 is not prescriptive; it provides examples only of where PCTs might exercise discretion to fund outside the 'Directions' and is not a definitive list. Thus it will be the responsibility of the PCT to decide when it is appropriate to exercise its discretion.
This is not specifically covered by the 'Directions' but relates to the examples in paragraph 6. It should be possible for PCTs to reach agreement with a GP practice or developer to take over a lease if this will ensure continuity of service delivery.
Paragraph 5(b) says, ?if the payment is to be made [by the PCT], the PCT must ensure that... the payment is made under the contractor's GMS contract and ?.any conditions to which the payment is subject which are set out in these Directions are terms of the contract?. Thus if there is a breach of any of those conditions, although limited to premises aspects, it could impact generally on the GMS contract.
Part 2 covers a practice's own proposal to undertake any of the purchase, development, construction or improvement of premises. Part 5 covers leasehold third party developer (3PD) situations.
Paragraph 8 of part 2 lists the circumstances under which practices may apply for a premises improvement grant ('PIG'). A 'PIG' may be granted for the following:
According to paragraph 9, a 'PIG' will not be granted in the following circumstances:
Premises improvement grants ('PIGs') cannot cover the entire cost of premises improvements. Paragraph 12 states that PIGs can only cover 33-66% of the total cost of premises improvements. However, there are instances where central policy initiatives override the 'Directions' and allow for higher grants (e.g. 'MADEL' funding for the GP registrar scheme). Practices should check with their PCT for any current initiatives.
The PCT can only agree a finalised project plan with a GP practice if the GMS contract includes a payments schedule setting out the financial assistance to which the PCT is committed. The contract must make clear that payments will only be made if the practice complies (or procures compliance) with the stated specifications, and does not depart from them without the PCT's consent. GP practices need to ensure that their agreements with builders or developers reflect the stated specifications.
Yes. The PCT is required to see that GP practices deliver NHS services from the subject premises for an agreed period, and may apply penalties if GP practices move out within this period. For projects costing up to ?100,000 (plus VAT), the period is at least five years. For projects over ?100,000 (plus VAT), the period is at least 10 years. A proportionate clawback of payments may be applied if there is a withdrawal within those periods (see paragraphs 12 (iii) and (iv)).
No, there are restrictions on the recovery of legal and other professional fees. It is not a general entitlement and is at the PCT's discretion.
No. Under part 3 only reasonable legal and professional costs incurred in occupying new or significantly refurbished premises may be reimbursed – not costs on projects that do not reach completion. GP practices have to give careful thought therefore to incurring costs before PCT commitment. Costs are only paid once the practice has occupied the new premises or completed the refurbishment.
If GP practices are undertaking the work themselves (and receiving notional rent payments or payments towards borrowing costs) then reasonable surveyors' and architects' fees and reasonable legal costs for construction and refurbishment work can be claimed (see paragraph 14(a) for details). In 3PD situations, reasonable costs for engaging a project manager to give advice on building contract issues (limited to 1% of the total reasonable contract sum) plus reasonable legal costs incurred by the practice in agreeing the lease or the contract for lease can be claimed (see paragraph 14(b)). The 'Directions' do not define 'reasonable'.
VAT must be paid in circumstances where the PCT has agreed that the underlying professional fees will be reimbursed and VAT is properly payable (see paragraph 15).
Negative equity may occur when the actual sale price of premises is not be sufficient to clear the practice's outstanding mortgage, and/or because of mortgage redemption fees charged by lenders. An application to cover these costs must be considered by PCTs, but a variety of checks and balances apply to such applications. For example, payments cannot cover that part of the overall borrowings or redemption charges that is:
If a grant is approved, the GP practice must agree for the money to be sent directly to the lender and provide the PCT with details on this. Details of any endowment policy cover linked to the mortgage and, if this is the case, of the surrender value must also be provided. This is because the PCT is required to deduct the surrender value from any grant it pays. The provisions are complex. GP practices should not assume that financial support in these circumstances will be provided by PCTs as a matter of course.
Yes. Where a practice is moving into new rented accommodation, it may borrow money from a third party (e.g. the developer/owner of the new premises to which it is moving) to pay such costs on behalf of the practice. The PCT may then agree to meet the regular repayment costs of the third party. It would seem inappropriate that these should be rolled up as part of the rent for the full term of the lease but should be kept separate so that only the amount borrowed is repaid.
Yes. Where premises are owner-occupied and the PCT, in line with its SSDP, wishes the practice to move to more suitable premises, it may offer the practice a guarantee of a minimum sale price on the existing premises. Aside from PCT discretions, there are checks and balances on this. For example, the PCT must be satisfied that on any transaction that may bring the guarantee into play, the purchaser is not a connected party to the GP practice. Furthermore, options for change of use of the premises must be considered. There must also be the option for a PCT clawback if the sale price of the existing premises exceeds expectations (e.g. due to a change of planning use). (See paragraphs 24 and 25.) The PCT must be convinced that the relocation will improve the range and quality of services provided. PCTs should seek independent professional advice in using this form of payment.
Owner-occupiers may apply for a grant to reconvert their property to former residential use and either rent it out themselves or through a registered social landlord. The 'Directions' include some precautionary measures that the PCT must consider before making such a grant. The use of public money for this purpose should be balanced by an agreement that the converted premises will be available at an affordable price.
Practices which are moving (or have moved) from leasehold premises to more suitable premises may apply for a grant to meet some or all of the costs associated with leaseholds. Costs may be incurred for surrendering or, if that is not possible, assigning a lease. Alternatively, the practice may leave the premises but continue to meet the costs under the lease agreement. PCTs may agree to meet these leasehold costs. A list of circumstances under which PCTs should refuse such applications is given in the 'Directions'.
Yes. If existing leasehold premises are unsuitable, have major dilapidations, and also have a tenant's repair covenant, funding may be requested from a PCT to help a practice to surrender a lease. Most commonly this happens when a landlord agrees to convert dilapidation costs to a one-off premium. This is then paid when the lease is surrendered (paragraph 28). GP practices must make sure they receive legal advice on dilapidation claims. Dependent on what is to happen to the premises after the surrender, a claim could be found to be misfounded or excessive.
There is scope to meet stamp duty land tax (SDLT) incurred on and after 1 December 2003 (paragraphs 30 and 59). This is an exception to the general rule that the 'Directions' only apply to post 1 April 2004 committed projects (or recurring costs incurred after 1 April 2004). However, once again the general ?budgetary target? PCT discretions and priority regime applies, and premises must be modern leasehold premises approved by the PCT. Projects that are PCT led can avoid SDLT as this is not payable by public bodies.
Yes. If a PCT is not willing or able to reimburse a cost, there may be other solutions. For example, a 3PD may agree to fund premises costs if the DV agrees that the funding can be rentalised either in the principal agreed rent or, possibly, as an additional rent outside of the review arrangements, for a period sufficient to amortise the spend plus interest.
If the PCT agrees to reimburse a practice's rental costs then the amount to be reimbursed is the lower of the current market rent (CMR) for the premises (with the calculation basis set out in schedule 2) and the actual lease rent for the premises plus VAT, if appropriate (paragraph 32). PCTs should seek professional advice on this matter.
Under notional rent payments, PCTs must review them every three years to bring payments in line with current market rent. The review may take place earlier if certain circumstances apply (paragraph 42). It is the responsibility of the PCT to undertake and implement these reviews. For leasehold premises, the rent review is determined by the terms of the lease. The PCT must continue to reimburse rental costs where these change as a result of the rent review, subject to the provisions of paragraph 32. In such instances, it is the responsibility of the practice to take all reasonable steps to ensure that the new rent proposed by the landlord has been determined at the proper level. Where the rent is reviewed to market value, it is expected that the practice will have been professionally advised throughout the proceedings. It is recommended that a practice should advise their PCT of any rent review notice received from its landlord at the earliest opportunity to forewarn them of a possible increase in the level of rent reimbursement.
Yes, but only in terms of granting or rejecting the initial application for funding. Once PCTs have agreed to reimburse recurring premises costs they must continue to do so (including any future changes to these costs).
Yes, but this is tightly controlled. Where premises are leasehold and in areas of deprivation, and as a result CMR assessments are low, PCTs may apply an ?uplift? to the CMR assessment. The amount of any applicable uplift may be obtained from the DV. The CMR assessment must be carried out in accordance with schedule 2 of the 'Directions'.
No. Paragraph 54 gives GP practices ?preserved rights? to payments for recurring premises costs that were being paid prior to 1 April 2004 under the old 'SFA'. Costs that must or may be made are described in part 5, with the change that they now go to the practice rather than to each practitioner, reflecting the change to the practice-based approach (paragraph 55(a)).
Variations to leases introduced on/after 1 April 2004 are covered by the 'Directions'. The PCT must be satisfied (before the varied lease is agreed), in consultation with the DV (where appropriate), that the terms of the lease represent value for money and are within budgetary and priority targets (paragraph 31(a)). Landlords and tenants need to be aware that all variations to leases will need further approval by their PCT.
Paragraph 35 makes clear that lease costs on equipment, furniture or furnishings can be covered. Again there are various checks and balances e.g. the PCT must obtain professional advice, and the lease term must not exceed the remaining term of the underlying occupancy lease. (Under the 'SFA' such costs were indirectly reimbursed to all GPs through other fees and allowances.) The DV can supply a list of those items that can be included as lease costs.
GP practices may seek payments to cover either the borrowing costs (?cost rent?) (paragraph 36) or notional rent of a development (paragraph 41). Various conditions are attached to these payments. In the case of borrowing cost payments (paragraphs 37 to 40), these include:
Notional rent payments should take account of the practice's expenditure on the development. Schedule 2 deals with the calculation of notional rent payments in more detail. Applications may cover:
Notional rent payments and borrowing cost payments are mutually exclusive to avoid double payments (i.e. GP practices can only opt for one of the two types of payment).
The prescribed percentages for cost rent are as follows:
The required link to the Bank of England's website is: http://213.225.136.206/mfsd/iadb/NewIntermed.asp This page highlights the statistical Interactive Database page and in the stats search box, type in iumlnpy for the fixed rate and type in iumbedr for the variable rate. These will provide the required Bank of England rates to calculate the fixed or variable rates as described in Direction 38.
PCTs may abate notional rent payments if the premises have been improved with the use of public capital, and this improvement has been completed on or after 18 September 2003. The amount of that abatement should be determined according to part 1 of schedule 3 (paragraph 43). The purpose of the abatement is to ensure that practices do not benefit from a free improvement to premises they own and, at the same time, obtain an uplifted return from notional rent (as a result of the premises improvements). The abatement is not 100% but allows for payments to cover the increased maintenance and service costs of the improved premises.
Paragraph 44 allows notional rent supplements to be applied for where GP practices have made further capital investments in practice premises. This ensures that GP practices benefit financially from premises upgrades that they themselves fund. Provided the PCT has first approved the upgrade, supplements must be awarded, although there are checks to avoid double counting (e.g. on owner-occupied premises where CMR calculations may reflect premises improvements). The supplement is calculated under schedule 2 and part 2 of schedule 3.
Where a GP practice is receiving actual or notional rent payments or borrowing costs and, in respect of premises, ?actually and properly? incurs costs that are not already covered by other payments under the 'Directions', the PCT must consider applications for payments to meet the following costs:
The practice must make a specific application to the PCT for payment and payments are subject to the standard ?budgetary considerations?.
Yes. See above question concerning the reimbursement of running costs.
Yes. Although practices may apply for payments towards the running costs of new or modernised premises (paragraph 46), there are restrictions on how much can be paid. To explain why this is the case it is important to remember that under the 'SFA' rent and rates scheme, GPs were directly reimbursed business rates, water and sewerage rates and clinical waste collection charges, where these were separately identified. However, fuel and electricity charges, buildings insurance costs, costs of internal or external repairs, plant, buildings and grounds maintenance, and service charges were not directly reimbursed under the 'SFA'. Instead they were subsumed under other fees and allowances and therefore paid indirectly to all GPs. In order to avoid double payment to practices, PCTs that agree to make payments towards running costs should take account of previous 'SFA' contracts. They should, where possible, identify payments already made under the 'SFA' and deduct these from any payments they would otherwise make. If there is insufficient information to work out the previous year's costs, a notional figure of 40% will be deducted from the amount otherwise payable. It should also be noted that there might be circumstances where service charges are already rolled into principal rent payments. In 3PD situations, the DV often agrees a principal rent level that reflects the costs that the landlord pays to cover services charges. If the principal rent has been agreed on this basis then the PCT is already providing financial assistance towards service charges.
Yes, if a PCT is funding a practice's running costs, and that practice has an ongoing licensee who pays next to nothing in rent but contributes to running costs, the income must be declared and brought to account as a debit against the PCT payment. The circumstances under which payments by PCTs in respect of recurring premises costs may be rebated are described in paragraphs 48 and 49.
Yes. Where a practice receives payments under part 5 of the 'Directions' (i.e. recurrent costs) and also receives private income from patients treated on practice premises (whether individually or under contract), excluding public authority patients, recurrent cost payments can be abated by up to 90% depending on the proportion of private income generated. A table for calculating the amount of the abatement is given in a table in paragraph 49.
Schedule 1 is dealt with below. Schedule 2 deals with current market rent and notional rent calculations. Schedule 3 addresses abatements on notional rent where NHS funds have been used in projects after 18 September 2003.
Schedule 1 indicates the minimum standards that practice premises must adhere to. GP practices in existing premises must have particular regard to these since, according to paragraph 52, practices that receive payments under part 5 of the 'Directions' will continue to receive those payments subject to schedule 1 requirements being met. For new builds/improvements, approval of the scheme will require compliance. If the minimum standards are breached but are capable of being remedied, the GP practice and PCT must agree a plan of action under paragraph 18(3) of the GMS Regulations. The plan must specify:
If premises do not meet the ?minimum standards? or work is not already in progress to bring premises up to those standards, the PCT should serve a remedial notice after having consulted the Local Medical Committee (LMC). The notice must allow a minimum of six months for the breach to be remedied. If the breach is not made good within the agreed period the PCT has the power to cease recurrent cost payments to the practice concerned.
If disputes arise they should be dealt with in accordance with local dispute resolution procedures agreed within the project plan. Failing this, they should be decided in accordance with the dispute resolution procedures under the new GMS contract: www.dh.gov.uk/PolicyAndGuidance/OrganisationPolicy/PrimaryCare/... Or by the courts in accordance with part 7 of schedule 6 of the 2004 Contract Regulations (available at the same website).