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Third Party Landlords

There are important issues to address when GP practices rent the surgery premises from third parties.  Inevitably there will be a formal lease and GP’s will need to take legal advice and probably that from a surveyor before signing up.  Here are just three of the
main issues to consider:-

1) Will the actual rent be fully reimbursed together with a  contribution towards future dilapidation costs?

2) Can a GP retire and be freed from his or her liability towards the lease?

3) How do we account for dilapidation costs?

Whilst 1) and 2) above may be obvious, some detailed thought needs to be given to item 3). Most leases will contain a clause which states that the building must be left in the same condition as it was in when the lease commenced.  It is therefore recommended that the practice set up a “sinking fund” whereby money is transferred into a separate bank deposit account each year to meet future dilapidation costs.  A Surveyor should be consulted at the beginning and every three years thereafter to estimate the cost so that the practice can continually transfer the correct sum to the sinking fund.  In this way, the cost will fall on the partners using the premises and not on future partners only.  In other words, retirement should not provide a GP with an escape route to avoid dilapidation costs.  However, from a taxation point of view, repair costs are only allowed when they are incurred and not when they are provided for in the sinking fund. Accordingly, an adjustment needs to be made to ensure that an outgoing partner receives notional tax relief on his or her share of the amounts transferred to the sinking fund, so that the benefit of tax relief is not wholly transferred to an incoming partner. 

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  • BW Medical Accountants have a good working knowledge of General Practice and are keenly aware of the challenges Practices face within the changing environment of the NHS.  We have been very impressed by the way BW Medical continue to deliver the range of services they provide from Accounts to Tax and NHS Pension advice. 

    We have found Practice consultation and engagement from BW Medical specifically helpful to shape the future of the Practice.

    GP Partner
    GP Practice, Newcastle
  • We had no hesitation in moving to BW Medical Accountants.  For any business your accountant is integral, and for us one of the most important factors to this relationship is to have a personal and trusting approach, which BW have undoubtedly achieved. 

    The service we receive and the interest they show in our practice assures us that they have a genuine interest in us and commitment to us.  More importantly they are always helpful and polite to answer even the dumbest of questions!  They give us confidence and reassurance knowing that they are always very up-to-date with all the numerous changes within general practice and we would have no hesitation in recommending them to other practices seeking a professional and personal accountancy service.

    Jackie Rotherham, Practice Manager
    The James Street Family Practice, Lincolnshire
  • We changed to BW Medical Accountants and I would say we have just had the most transparent and understandable end of year meeting and the best planning advice I have ever had in 16 years of practice.

    GP Partner

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