3 Sep 2020
All you need to know about the Notional Rent reimbursement
Notional rent is a method of reimbursement for GPs who own their own practice premises and use it for NHS approved purposes. The reimbursement incentivises the upkeep and maintenance of the practice premises and supports any lending.
It is based upon the current market rent (CMR) that the property could otherwise earn, based on notional lease terms of 15 years, as determined by the District Valuer (DV).
Assuming that there are no significant changes during that time – such as further capital investment in the premises – then the notional rent will be reviewed every 3 years.
GPs will either own the property as a partnership asset (named partners hold the title on Trust for the whole partnership) or as named owners personally outside of the partnership. If the premises are a partnership asset it is possible that the ownership ratios amongst the partners are not equal.
Accounting for the allocation of the notional rent reimbursement where there are a number of partners with differing shares of the property requires a prior share mechanism in the practice profit allocation.
There are various other matters that need to be considered with regards to the notional rent. For example, should the practice opt to let GMS-approved space within the property to other tenants such as a pharmacy, then the notional rent reimbursement will be reduced to remove the rent attaching to that area of the building. There would not be any guarantee that the practice can revert to previous notional rent arrangements should the tenant leave.
Furthermore, the notional rent assessment by the DV can be challenged by the practice. This should be done through an independent specialist medical surveyor and could result in a significant uplift.
Where the property is not a partnership asset it should not be reflected on the balance sheet of the practice accounts. Instead a separate lease should be put in place between the property owners and the tenant practice partnership, with a separate landlord’s statement of rental income and expenditure. In this case the lease is often set up to mirror the Notional Rent deemed lease terms so that the amount of rent matches the notional rent received. However, that does not always have to be the case and provided the actual lease terms are approved by the DV then the landlord will receive full reimbursement to cover the actual rent payable to the landlord.
Improvement Grants
Premises improvements grants are additional funding through the contract for one-off investments to improve, alter or extend the existing practice premises. Generally speaking, the grants are not available for expenditure on replacements and repairs of existing features or for the initial installation of certain basic systems such as air conditioning and telephone systems.
To take advantage of improvement grants, your practice must follow the procedure laid out in the NHS Premises Costs Directions. Broadly speaking, this means that having identified the areas requiring investment, the practice should review whether they meet the eligibility criteria and must bid for the funds from NHS England by completing detailed bid documentation and then undergoing the review process and obtaining written agreement from NHS England.
Useful Links
NHS GMS Premises Costs Direction (2013) and other contract information:
https://www.gov.uk/government/publications/nhs-primary-medical-services-directions-2013
LMC Premises Improvement Grant Process:
To discuss this further, please contact Jenna Clark.