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Cost Rent trap for GP surgeries

2 July 2013

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Many GP practices are falling into a “financial trap” by not informing NHS England when their Cost Rent scheme comes to an end. 

Cost Rent is paid to GP practices to reimburse borrowing costs from developing or modifying new premises. 

Under the Premises Costs Directions 2013 practices are required to keep NHS England fully informed on loan arrangements, especially when they expire. 

But failure to update NHS England can result in large sums of money being claimed back from the practice. 

There has been a significant increase in the number of enquiries from GP surgeries in this situation.

James Williams, principal surveyor at GP Surveyors, a firm of chartered surveyors said: “Many Cost Rent schemes, based on loan agreements of 20 years, are now naturally coming to an end – unless the practice has refinanced. This is one of the reasons for the increase in enquiries that we are receiving.”

The Cost Rent system has generally been phased out, having been replaced by the Notional Rent system – onto which practices should transfer when their Cost Rent expires.

But Williams said: “It is up to the GP practice to notify NHS England before it happens so that there is a smooth transition onto the Notional Rent scheme. However, some practices are failing to do this.

“Some GP practices simply assume that NHS England will hold details of when their Cost Rent is set to expire and that they will manage the transition for them when the time comes. Others simply forget and can go quite some time without realising.

“However, if this is the case, once NHS England become aware of the situation, they will ask that the practice pays back any excess funding that they have received since the Cost Rent expired. This can be very financially damaging for a GP practice, especially at a time when money is already so tight.” 

Practice managers have been urged to maintain communication with NHS England before and during the transition. 

It is also possible for a surgery to transfer from Cost Rent to Notional Rent before the Cost Rent scheme comes to an end.