The 2024 Premises Cost Directions came into effect 10 May this year, replacing the NHS Premises Cost Directions 2013. Going forwards, all payments to GMS GP contractors for premises costs will be governed by the new Premises Cost Directions.
The new Cost Directions bring with them a number of significant changes, some of which we have summarised below:
Notional Rent Assessments
- There is reference to property valuations for NHS England being undertaken by an ‘appointed valuer,’ there was previously an amendment to the 2013 directions which allowed for this, but we did not typically see this put into practice. Defined as: A suitably qualified professional registered with the Royal Institution of Chartered Surveyors, appointed by NHS England to perform property valuations or related specialist services. If NHS England utilise this avenue, it should help alleviate the significant delays in funding application approvals.
- A requirement for the contractor to confirm that it does or does not accept the amount of CMR determined by the valuer within 12 weeks of the determination, or within a longer period agreed upon by NHS England and the contractor.
Abatements
- It is clear that the new Cost Directions are placing a greater emphasis on improving practice premises, whilst simultaneously trying to ensure that practices utilise the space efficiently to avoid any waste in funding. NHS England are now willing to fund improvements at 100% of the cost, with a more robust repayment structure scaling up 5 times depending on cost and repayment period:
In 2013 Directions:
The commissioner contribution ranged from 33% to 66%.
The value excluding VAT and the corresponding abatement/guaranteed use periods were as follows:
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- For values up to £100,000, the abatement/guaranteed use period was 5 years.
- For values between £100,000 and £250,000, the period was 10 years.
- For values over £250,000, the period was 15 years.
In 2024 Directions:
The commissioner contribution can be up to 100%.
The value and the corresponding abatement/guaranteed use periods are as follows:
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- For values up to £144,000, the abatement/guaranteed use period is 6 years.
- For values between £144,000 and £360,000, the period is 9 years.
- For values between £360,000 and £660,000, the period is 12 years.
- For values between £660,000 and £1.2 million, the period is 15 years.
- For values over £1.2 million, the period is 18 years.
Other changes
- During a leasehold rent review, the contractor must first negotiate a rent with the Landlord prior to being sent to NHSE for reimbursement.
- NHS Property Services Limited and Community Health Partnerships Limited to benefit from upwards only rent reviews.
- As previously mentioned in the Abatements section – there is a requirement for NHS England to consider, with the contractor, whether the premises could be multi-functional / accommodate other services or providers. The Directions make a provision for taking account of income derived from that occupation and to take account of the contractor losing that income when the occupier vacates.
- Contractor to provide (when applying for grant funding) a Project Initiation Document in accordance with NHS England’s Standard Operating Procedures.
- The contractor to use reasonable endeavours, when agreeing a new lease, to ensure that the Landlord does not exercise the option to tax (i.e. to charge VAT) during the lease term. Failure to agree a landlord covenant in these terms on a sale and leaseback arrangement will leave NHS England with a discretion as to whether or not to reimburse VAT.
There are many changes included in the above which will have a significant impact on the processes and procedures relating to rent reviews, lease renewals, notional rent appeals and NHS funding for premises improvements. Aitchison Raffety will be monitoring the impact of these changes and discussing these with other stakeholders.
If you would like to discuss how the changes may affect you and your practice, please do get in touch with our Healthcare Team via healtchare@argroup.co.uk