Find answers to common queries about running a Healthcare business. Whether it's a legal or financial question, or simply tips on encouraging patients to join your dental plan - we can help.
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a) If you do not have a Partnership Agreement you are a Partnership at Will governed by the 1890 Partnership Act. In a Partnership at Will the partnership automatically ends on the day of the retirement or death of a partner so, technically, when the partner leaves in July that dissolves the partnership between all of you. The effects of the dissolution of a partnership include that all the partnership assets are put up for sale, including the surgery premises, and that all the staff are redundant. If you have any contracts which are with the practice, rather than individual partners, these would technically terminate as the partnership consisting of the four of you would no longer exist. This is obviously not a desirable situation.
b) I would advise you to have a Partnership Agreement prepared to be signed before the partner leaves in which there should be a clause stating that the death or retirement or, indeed, bankruptcy of a partner will not terminate the partnership between the other partners.
The Agreement should deal with shares of profits and losses, fixtures and fittings, and other assets, including the surgery premises and any contracts held by the partners individually in their names but which are actually held in their capacity a member of the partnership. It is also important to set out such things as good faith and valuations of capital assets.
What happens when a partner is absent from the practice, for example due to holiday leave, maternity, paternity or adoption leave, compassionate leave, jury service and illness should be dealt with in the Agreement, including whether the partner receives their profits and who pays for a locum, if one is required.
It is important to stipulate in the Agreement which earnings are considered partnership earnings and which are considered those of the individual partners, together with which expenses are considered partnership expenses and which are considered individual expenses. Partners' obligations to each other should also be set out as should any restrictions on the actions of partners. How the partners make decisions, for example which decisions should be made by a majority vote and which decisions should be decided unanimously should be included in the Agreement as should authority and fitness to work.
Especially in view of the fact that a partner is leaving shortly, the provisions in a Partnership Agreement as to what is happen in respect of an outgoing partner's current account, including undrawn profits and any saving for tax, and whether the other partners will purchase their share of the premises will be important.
Companies house: http://www.companieshouse.gov.uk/infoAndGuide/llp.shtml
Andrew Lockhart-Mirams from Lockharts Solicitors. Download PDF
GP Partners owning their surgery will often have capital tied up in the bricks and mortar that could potentially be released by creating a lease back to themselves and selling on the investment. This is commonly referred to as a sale and leaseback transaction.
The advantages of such a move are:
The disadvantages include the loss of potential capital growth for retirement, the perceived loss of the 'family jewels' and the potential tax on unearned income if some of the partners purchase/retain the freehold investment.
If the partners decide to proceed, certain pitfalls need to be avoided and it is recommended to seek advice from a specialist, Chartered Surveyor.
The value of the investment will be influenced by the level of rent accepted by the GP practice, who, as tenants, are not going to pay more rent than they can get reimbursed. A specialist surveyor can negotiate with the District Valuer to maximise notional rent and thus enhance the level of rent under the new lease.
The terms of the lease need to be considered carefully as they will affect the GPs' rights as tenants and influence the value of the investment. A long lease, with greater tenant responsibility, increases capital value, while a shorter lease, break clauses and increased landlord responsibility reduce capital value. A surveyor can advise on the issues, setting out Heads of Terms for the proposed lease that offers the best compromise. Consideration should be given to repairing obligations and a condition survey may affect the lease terms.
Some of the existing property owning partners may wish to retain the investment and become landlords, buying out any partners who wish to release their equity or retire and appropriate valuation advice should be sought.
When selling to a private investor one would normally look to market the investment and your surveyor will advise you on the best strategy. A private investor or small pension fund's principal objective is to achieve a secure return on money, although the practice may want a little more from its landlord - for example, to undertake improvements or refurbishment in the future. For this reason, it is best to consider one of the specialist landlord/developers.
www.pcpf.co.uk
John Hearle FRICS MCIArb from Aitchison Rafferty Property Consultants. Download PDF
With growth or change within any business comes a requirement to re-evaluate ones position in the market place and the way that one is perceived, not just within the Healthcare sector itself but by potential clients and patients by ones own employees. There comes a stage during the development of most organisations when there is a need for re-evaluation; an opportunity to examine both internal and external perceptions and to make a plan to move forward.
Every organisation carries out many interactions every day. Each one of these interactions will reflect the way that the organisation portrays itself to everyone that it deals with. All organisations have an identity then – whether it is explicitly managed or not. Identity can project four things: who you are, what you do, how you do it and where you want to go. These four main things manifest themselves visually in how you look to the outside world, and also in culture and behaviour – both to the world outside and internally to employees. In order to be effective every organization needs a clear sense of purpose that its employees understand. They also need a sense of belonging. Purpose and belonging are the two facets of identity. In other words, identity is not just about a logo, a letterhead and an advert, it is about how the world perceives you as an organisation, not just as a client or potential client but even as an employee. It is about how you answer the phone and what your surgery or premises look like, it's about how your clients, patients or customers feel when they interact with you and your staff.
Once an organization understands its nature, its aims and its ambitions, then design, visual and written tone of voice work can be undertaken in order to effectively communicate the brand identity to the outside world and internal stakeholders. It is this brand identity that will help you stand out in an increasingly competitive sector.
www.stazikerjones.co.uk
Leigh Jones from Staziker Jones Design Consultants Ltd. Download PDF
Essentially three components are required, namely:
All the components are of equal significance but the most frequent hurdle is that of securing PCT funding. This funding is being sought by way of notional rent assessment, otherwise known as Current Market Rent Assessment to provide rental income for the new medical centre.
The PCT will normally expect to see a business case that details how the Practice intend to restructure the way that clinical services are provided so as to show an overall saving to the health economy. Sometimes the Practice Manager is capable of preparing or alternatively a health planner is required to help present a robust case as to why a new medical centre should be delivered.
The Practice will also need to be clear as to how the new medical centre is to be procured, ie, is the Practice going to be the developer or is the Practice going to be a tenant in a medical centre developed by a property developer? The choice as to which procurement route is preferred will depend upon the dynamics of each particular GP Practice. This can depend upon the appetite for risk in undertaking property development. Also, the respective ages of partners may also be an issue together with the ease of attracting new partners to the Practice in the future.
To assess the options for a new medical centre, the Practice should appoint a professional team to advise. The Practice may well have existing professional advisors, possibly surveyors acting on behalf of the practice to undertake a review of the Current Market Rent assessment together with solicitors and accountants who will need to be involved in the development process.
www.primarycaresurveyors.com
Adam Thompson from Primary Care Surveyors Download PDF
This very much depends on the dynamics of the GP Practice in question and the general appetite for committing the Practice to considerable capital expenditure and time commitment to bring about the development. With new medical centres generally being a large, specialist buildings, the cost of constructing such a property can be considerable. For the doctors to undertake the development themselves, there are often VAT issues that need to be considered which can make the option of being developer prohibitive. However, capital allowance tax relief may be forthcoming which may help offset some of the liability to VAT.
Often with GP Practices having historically owned their own premises, the Practices are reluctant to relinquish property ownership and there are many recent examples of GP Practices undertaking their own premises development.
Either which way, it is essential to have full professional representation of appropriate advisors to ensure that the successful development of a medical centre is delivered.
Development routes open to a GP Practice comprise a developer themselves, or alternatively to use a specialist third party developer (known as 3PDs), of which there are numerous such developers acting throughout the UK. An alternative route is to use LIFT/LIFT Express which is a public/private partnership in which the PCT is a shareholder.
The decision as to which procurement route is used will very much depend upon the particular dynamics of each GP Practice, which in turn may depend on the age profile of the partners and the general appetite for committing time and expenditure to bring about a successful development of a medical centre.
Generally it is advisable to enter into negotiations with the District Valuer to ascertain the facts behind the proposed rent. Whilst the market for primary care premises is less volatile than the general commercial property market, it is not immune from general economic trends and there have been many recent examples of there being downward pressure on rent within the sector. When negotiating rents of surgeries, it is imperative to review transactions or other rent reviews of other surgeries to rely on comparable evidence rather than merely relying on perception of general shifts in values.
Should negotiations have not taken place for reviews of Current Market Rent Assessments, it is quite possible that the floor areas as used by the District Valuer have not been recalculated in accordance with more recent guidance as issued by the Royal Institution of Chartered Surveyors. In some instances it is possible to secure an increase in the Current Market Rent Assessment by virtue of correct measurement of the subject premises. It is worthwhile using surveyors with much experience, who are familiar with the sector and who frequently undertake negotiations with the District Valuer.
If agreement cannot be reached with the District Valuer, there is an appeal procedure whereby the disputed rent review can be referred to an experienced valuer in the sector, as appointed by the Royal Institution of Chartered Surveyors. However, it is far more common for rent review to reach a negotiated settlement without the need to implement the appeal procedure.
In some instances the PCT are stipulating that the new medical centre is to be cost neutral or to be funded by way service reprovision. This in effect means that the PCT is trying to secure a new medical centre for no additional premises costs over the Practice's existing premises or alternatively to consider the total referral budget of the particular GP Practice and to see whether by the Practice moving into a new premises, there may be a way of restructuring services that will lead to savings in the health economy exceeding the additional rent being required to support the new medical centre. A health planner can often advise in the opportunities to restructure service provision and estimate the savings that should then be forthcoming.
The other way to secure additional income is by attracting occupiers who wish to be within the same building as a GP Practice. Such other occupiers are inevitably health care related with the most obvious candidate being a pharmacist. Depending on prevailing market conditions and issues over the opportunity to secure an NHS dispensing contract or to relocate an existing contract, sometimes it is possible to attract a reasonable level of rental income from a pharmacist as a tenant, as well as sometimes a premium (one off capital sum) payable an incoming pharmacist as tenant to secure premises adjacent to a GP Practice.
The true position is that any provider may enter into arrangements to deliver health services using PGD's but they may not necessarily be able to develop or authorise PGD's independently.
Enquiries about the ability of private providers, who have registered with the CQC (Care Quality Commission) after October 2010, to develop their own PGD's confirm that existing provisions under medicines legislation remain unchanged. That is to say:
The only private providers who can develop and authorise their own PGD's are those who are:
Firstly, it must be recognised that vaccination services are a 'regulated activity', as defined, and therefore, any independent provider who aspires to 'treatment of disease, disorder or injury', which includes vaccination services, is required by law to register with the CQC. Many, such as the questioner, will not want to face the complexity and cost of the registration process and for them there is good news. Under the existing legislation, new providers will be able to enter into arrangements with those existing providers currently registered with the CQC as an independent hospital, independent clinic or an independent medical agency to authorise and develop PGD's.
Companies such as Health Hosting Limited, offer complete packages including vaccination training, PGD training, Standard Operating Procedures (as templates) and Patient Group Directions (or Patient Specific Directions) where appropriate. All aspects of this type of training will reflect the CQC publication 'Essential Standards of Quality & Safety'.
As with all problems, real or perceived, there is a solution. There is no 'shut out' for pharmacies wishing to enter the Healthcare market as independent providers of vaccination and/or other services. There are one or two 'hoops' to jump through, it is true, but most would agree our questioner is not alone in looking at the 'bigger picture' as far as income is concerned.
Finally, existing legislation is 'being reviewed'. As to whether the outcome of that review makes things more difficult or simpler remains to be seen but one hopes that the legislators recognise that pharmacy and their patients need things to be as simple as possible.
www.HealthHosting.co.uk, www.mhra.gov.uk and www.nelm.nhs.uk
R. Brookbanks and M. Ibrahim from Health Hosting Limited Download PDF
The underlying principle to keep in mind is that CQC registration relates to the GP practice rather than the premises, with the inference being how premises are used will need to be thought through.
Of the CQC requirements, Outcome 10 relates to the safety and suitability of premises but mostly relates to such matters as ease of access (i.e. disabled persons' access) and infection control.
There is a lot of concern about CQC compliance, similar to that leading up to the Disability Discrimination Act 1995 (now the Equality Act 2010). Leading up to that date there was some hysteria that premises without lifts would have to close. In practice, most occupiers found practical ways to meet the requirements that didn't mean drastic changes to their premises and this is likely to be similar with CQC compliance.
The CQC say they will provide guidance and support to enable practices to complete their registration, but have not yet offered specific premises guidance for practices. The BMA considers compliance could and should be demonstrated by the practice's contractual commitment and is trying to persuade the CQC of this. The BMA, therefore, recommends against significant work on preparing to demonstrate compliance at this time.
The most pragmatic advice is, therefore, to consider the current position in the practice and what practical steps can be taken to make the surgery more user-friendly.
For example, has an access audit undertaken to establish how disabled persons use the premises? Practices should check if they have had a recent audit, or if not, to arrange for one to be undertaken. Furthermore, does the practice have a policy or procedure as to how it sees disabled patients when an access ramp or lift is not provided? If access is difficult, find a way to manage the problem but also consider a plan of action as to what you intend to do about it. For those practices that do have a lift, identify how disabled patients would access/egress the property should the lift be out of service.
There will no doubt be surgeries that will need to have some work undertaken. Infection control is one such area where practices may need to consider. For example, if the type of flooring in treatment rooms is not sufficient, then have a refurbishment plan stating when the practice intends to replace the flooring. The key point is that the information provided by the practice can be substantiated.
It would be impractical and unaffordable for the issues of CQC compliance to lead to GP practices needing an immediate relocation to new premises. In some instances practices do need to move but for those practices that is likely to have been the case with or without CQC regulation. For such practices, there should be a plan of action identifying the process to move to new premises and this is part of the evidence-based documentation that the CQC may want to see. Alternatively, there may need to be a programme of planned refurbishment and this again is the evidence-based documentation the CQC may want.
Adam Thompson from Primary Care Surveyors. Download PDF
You certainly do, for a number of reasons. The first is practical. If any particular terms apply to the new partner, it will be much more difficult to enforce them unless he or she has signed the partnership deed. For example, if you need to ask him or her to leave before his or her probationary period ends, how can you be sure you will be able to if the deed doesn't say you can? Likewise, if it is agreed that he or she will buy in to the premises, how will you enforce this when the times comes without a line in the partnership deed saying that?
It is a common misconception that it is best to wait for the partner to get through his or her probationary period before getting him or her to sign the deed. The moment the new partner joins, whether there is a probationary period or not, the partnership is likely to be a partnership at will. As referred to elsewhere in these FAQs, that means that if there is a dispute there is no power to expel, only to dissolve - and dissolution risks the GMS contract being put out to tender, all bank funding being called in, and all staff becoming entitled to redundancy payments. This is a situation best avoided, because if any disputes arise they can then become very damaging indeed.
http://www.vwv.co.uk/site/sectors/primaryhealthcare/
Oliver Pool from Veale Wasbrough Vizards. Download PDF
If you have an open-ended GDS contract, the GDS Regulations 2005 give you the option to practice in partnership with another dentist. This mechanism can be used to "transfer" the GDS contract without obtaining the consent of the PCT. The buyer of the practice initially becomes your partner for a period and you then subsequently retire from the partnership.
The consent of the PCT will be required to transfer your GDS contract if the partnership mechanism is not used. This may be refused, due to European procurement requirements.
If you have a PDS contract, the partnership mechanism is not available. However, you can convert this to a GDS contract under regulation 21 of the PDS Regulations. If you have a PDS Plus contract, only the UDA component will transfer to the GDS contract, so conversion is likely to be financially attractive.
Wayne Thomas from Thomas Guise Solicitors. Download PDF
The Companies Act 2006 has codified the duties owed by directors to a company.
A director must act in accordance with the company's constitution. Even actions which have been carried out in good faith can breach this duty if it is not in accordance with the company's constitution.
A director of a company must act in a way which he considers would be most likely to promote the success of the company and having regards to the:
This duty is not breached by a director acting:
This does not stop the directors taking advice provided they use their own judgment in deciding whether or not to follow that advice.
Directors are required to use the care, skill and diligence that would be exercised by a reasonably diligent person with the general knowledge, skill and experience that:
An experienced director must not fall below the standard expected from someone of his experience, but an inexperienced director cannot rely on inexperience as an excuse if he should have known better.
A director of a company must avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company.
This applies in particular to the exploitation of any property, information or opportunity and it is immaterial whether or not the company could take advantage of the property, information or opportunity.
Authorisation may be given by the directors provided that any requirements as to quorum and voting at the meeting must be met without counting the conflicted director.
The duties (with the exception of the duty to exercise reasonable care, skill and diligence) are enforceable in the same way as any other fiduciary duty owed to a company by its directors.
The consequences of breach may include:
Promoting dental plans to patients really is a team effort! Your support team should fully embrace the many benefits your dental plan offers to both the patient and the practice.
If you are considering a move away from the NHS you will be required to give your patients 3 months notice - this is best done by writing to all patients giving a succinct reason for the change and strongly recommending your dental plan as the best way forward to help the patient stay dentally healthy. You may wish to highlight that by joining your dental plan, patients can spread the cost of their preventative dental care and if you are offering a dental maintenance plan you can highlight any discounts you may be offering on routine dental treatments, as well as the supplementary insurance cover for any unexpected dental accident and emergencies. Once again your team need to fully prepared in dealing with the queries patients may raise on receipt of their letter.
If you're already private and operating on a largely fee per item basis - the most effective way to promote dental plans to your patients is to appoint a 'Plan Coordinator' within your team whose responsibility it is to discuss the plan benefits with all patients when they attend the practice and implement systems and processes to follow up any 'undecided patients' along with all associated administration. Of course this will depend on staffing levels - if you are not able to have a dedicated person than ensure all team members are clear of their roles and responsibilities.
You should consider the pricing of your dental plan and ensure that the plan represents good value for money for the patient and profitable for the practice - for example 2 dental health reviews, 2 hygiene visits and 2 small x-rays per year should cost at least the same for the patient on a fee per item basis as it does for 12 months plan fees! It will be much more difficult to persuade the patient to join your plan if it costs more than staying with your practice on a fee per item basis.
One final tip - patients need you, as their dentist, to give a clear recommendation. Persuading patients to join a plan is a team effort and that includes the dentist!
For further information please visit www.dpas.co.uk
Janice Charlton from DPAS Ltd Download PDF
Companies house: www.companieshouse.gov.uk/infoAndGuide/llp.shtml
In a nutshell, incorporation is the process of 'selling' your dental business to a Limited Company. The business then becomes a separate entity to yourself and you have 'limited liability' for it, aside from any personal guarantees you have provided.
It gives you the chance to benefit from the capital value of your dental practice now, as opposed to when you sell it or pass it on. It can boost your personal income and save you tax over a period of time.
For a proportion of dentists, this transfer process provides a tax free lump sum which admirably replaces their existing personal income. It also means that as directors of a limited company, they benefit from paying corporation tax at a lower rate going forward than the income tax they would have paid as sole traders or partners.
Incorporation is a significant opportunity for many dentists. However, the numbers do not stack up in the right way for every dentist. This is why it is vital you have an incorporation expert to look at your situation individually.
Whether incorporation stacks up for you depends on a number of factors, including:
There are 35+ areas to consider or action during incorporation so it's crucial you put the process in experienced hands. Someone who can make an assessment about your individual situation and will lay out the pros and cons of incorporation for you.
For more information please visit www.clearvisiondental.co.uk
Rob Walsh from Clear Vision Accountancy Group Limited. Download PDF
Capitation schemes are designed to provide for all forms of routine dental treatment, although the exact specifications of this cover do vary from practice to practice. The dentist will commit to ensuring that all necessary dental treatment is carried out for the agreed monthly fee, up to the limits of the agreement. A typical Capitation Plan will include all necessary dental treatment, aside from the outsourced laboratory fees. Maintenance schemes on the other hand are designed to provide cover for the basics of preventative dental care. For an agreed monthly fee, the dentist will guarantee 2 or more check-ups per year, a specific number of hygienist appointments and all necessary small x-rays. The Maintenance Plan is ideal for patients wishing to spread the cost of their basic preventative dental care and encourages the patient to attend regularly whilst providing the dentist with a guaranteed monthly income.
For more information please visit www.dpas.co.uk
Sam Brice from DPAS Limited. Download PDF
Practice-branded dental plans are designed to allow practices to maintain their identity and establish a range of plans that are tailored to their specific needs. With all the benefits of outsourcing the administration, a practice-branded plan provides dentists with the means to establish schemes that are tailored to their individual requirements. All promotional material features the logo of the practice, rather than the plan provider, thus maintaining the loyalty of the existing patient base and avoiding the risk of being implicated by association. Ultimately, practice-branded plans leave the practice itself in the driving seat, with full control over prices and the service offering. Nationally-branded plans on the other hand are standardised, with all members committing to adopting plans from a limited catalogue upon joining the scheme. With nationally-branded plans practices are heavily associated with the provider's brand and commit to promoting the plan provider, along with the practice itself.
Gifts constituting a reward for services rendered are always taxable, as are cash, vouchers and large gifts (although tax law does not define large in this context).
The tax and NIC may be paid either by means of a PAYE settlement agreement (PSA), or by adding the cost of the gift to the employee's pay and putting this through the payroll system as part of his/her monthly pay, as usual.
A PSA is an annual agreement signed by you (as employer) and HMRC by which you agree to pay the tax and NIC on taxable gifts made to employees. The tax and NIC you pay – as well as the cost of the gift - is tax deductible for your business.
There are some non-taxable gifts which one may make to employees – the so-called minor and trivial benefits; these are tax deductible for you without being taxable on your employees. They are small gifts made to employees (perfume, chocolates, flowers etc) on marriage, birthdays, birth of child, and similar events, and seasonal gifts to employees such as a Christmas turkey and chocolates.
Note, however, that gifts by way of a reward, vouchers and large gifts are always taxable.
http://www.hmrc.gov.uk/paye/exb/a-z/c/christmas-bonus.htmhttp://www.hmrc.gov.uk/paye/exb/a-z/t/trivial-benefits.htm
Penny Jones from Dental Business Solutions. Download PDF
There are a number of key figures in your practice accounts, and 2 of these are your net profit and your drawings.
Your net profit is basically the income that you generate from treating your patients less the expenses that you incur in running your business e.g. payroll, dental materials and lab fees and overheads such as rent and rates, insurance, repairs etc.
On a day-to-day basis you, as the practice owner, will need money to live on and so you will usually transfer amounts from the practice's bank account to your private bank account. These amounts are called "drawings" because "to draw" means, amongst other things, to take money from a bank account.
Drawings for a practice owner are effectively the equivalent of an employee's salary but for the purposes of accounts are not deducted in calculating the net profit for the practice and instead are deducted from your capital account (see below).
Although your practice may make a profit it is important to realise that this is before taking into account your drawings, or salary. So, it is a useful exercise to compare your drawings to your net profit. If your net profit is greater than your drawings then your practice s generating sufficient income to support your lifestyle. However, if your drawings are greater than your net profit then effectively the practice has made a loss and is not profitable enough.
It is generally not a cause for concern if your drawings are greater than your profit for the odd year but if this situation continues for a prolonged period of time then it will prove necessary to borrow money that can prove expensive, if personal expenditure can't be reduced.
If drawings exceed profit for a prolonged period then it is likely that your capital account will become overdrawn. Your capital account balance equals your net profit plus any capital introduced less your drawings and is a cumulative figure from the date your practice started trading.
Another downside to an overdrawn capital account is that HMRC will disallow (i.e. you will not receive tax relief) a proportion of any bank and loan interest incurred whilst your account remains overdrawn.
Your accountant should send you a detailed analysis of your drawings with each set of annual accounts so that you can double-check that only personal expenditure has been included thereby ensuring that you are not missing out on tax relief on any legitimate business expenditure that may have been incorrectly treated as drawings.
It is a common, and understandable, misconception that you are taxed on your drawings rather than your net profit but this is not the case. Drawings are clearly an important figure, as can be seen from the above, but reducing your drawings will not decrease your tax bill.
Nick Stewart from Dental Business Solutions. Download PDF
A computerised bookkeeping package will help you run your business more professionally – like a business person. As a business owner, like it or not, you are a business person, and no matter how much you dislike the figures side of running a business it is something worth getting to grips with.
A decent bookkeeping package should help you to obtain management information and be more responsive. It will enable you it have the finger on the pulse of your business. This is especially true where you have delegated some of your finance functions (such as bookkeeping, or managing suppliers) to your staff.
Indeed one of the benefits is - it will allow you to delegate these activities without loss of control, allowing you to spend more time on doing what you do well.
Initially many people who are not used to looking at financial information find financial reports overwhelming. Don't be put off though! Your advisers should be able to help guide you initially, and with a bit of perserverence the confidence and understanding soon follows.
Having good quality reporting available will help you talk to your advisers about your business, whether it be at the bank or your accountant, enabling them to understand how your business is trading in real time and then to help you.
Whilst most business owners do have a feel for their business and how it is performing it is difficult to convey that to anyone else without the reports that a bookkeeping package can produce.
When evaluating a business during a sale or purchase we feel more confident that a business that runs computerised bookkeeping packages is being managed well, which in turn gives buyers more confidence and can help increase value.
As with any bookkeeping method you need to ensure the system is set up correctly and used properly, so you may need additional support in the first year. This may mean additional cost but it is essential though, as If the information going in is bad - the information coming out will also be.
Your accountant should be able to recommend a bookkeeping package that suits you and your business.
Nathan Poole from Dental Business Solutions. Download PDF
A well organised record keeping system can make running your business much easier and save valuable time.
Ideally the following records should be compiled and stored for each financial year: purchase invoices, bank statements, loan statements & finance agreements, takings records (e.g. SOE), credit card statements, cheque book stubs, payroll records, NHS pay statements & superannuation summaries, year end stock summaries & petty cash books.
As a general rule records should be kept for six years.
Darren Nicholson from Dental Business Solutions. Download PDF
When you refit a surgery in your practice, you can claim tax relief on the costs incurred. The form of the relief depends upon the type of cost involved. You claim relief against trading profits for repairs and renewals to existing features, including redecorating the surgery, within your profit and loss account. Income tax relief for the cost of new and second hand equipment (including installation costs) is claimed under the capital allowances rules (of which more below) and again, the claim reduces your taxable trading profits.
The costs of making improvements to property are not deductible against income tax, but freeholders will be able to claim relief for enhancement costs against capital gains tax, when the property is sold (typically, on retirement or when the property is sold to a Self Invested Personal Pension (SIPP)).
For capital allowances, the Annual Investment Allowance (AIA) limit tumbles from £100,000 to £25,000 per annum from 6 April 2012 (1 April 2012 for limited companies). On the same date, the annual writing down allowance is reduced from 20% to 18%. This means that the relief on existing assets or any expenditure in excess of the AIA will be lower than before.
Where an accounting period straddles 6 April (1 April for companies), the AIA is pro-rated around this date and it is not possible for expenditure in the period falling after 6 (1) April to exceed £25,000.
As the tax relief available under the new rules is significantly less than under the existing rules, it will almost certainly be worth considering making purchases prior to April 2012. If you are planning to spend in excess of £100,000, you will need to plan ahead so as to spread the cost over two accounting periods, and in the most tax efficient way.
Setting your private fee list is key in creating a successful of practice. A practice with the right fees and with the right location and team is much more likely to succeed.
However, what are the right fees? Well we know from experience there are many areas that need to be considered in setting or revising your fee list.
Whilst understanding the demand for services and the local competition is important, one must also assess the impact of the costs in your business in pricing effectively.
There is no point in pricing items at such a low level if you are not making a decent profit. You may feel busy in practice, but ultimately your bottom line will be heavily effected.
Therefore when pricing your services, it is important to fully understand the costs of providing a particular service to a patient.
Some services may have higher costs associated with them, as they may have high laboratory bills or may take longer in time (hence more overhead costs), so such services need to be fully considered.
Therefore it is essential to understand the costs of providing your services and then pricing your treatments at a level which considers the demand implications plus the local competition.
Once you understand your cost base fully, it is much easier to price your services for a winning strategy. In particular, you may use a loss leader strategy on check –ups, which may lose you money, however, if you are getting a lot of new patients, and you are being able to sell other treatments and services which more than easily make up this loss, then it has been a successful pricing strategy!
For further information on setting your fees for a successful practice, please contact Samera on 0207 100 8788 or visit www.samera.co.uk
Arun Mehra from Samera Ltd. Download PDF
Two thirds of all start-up businesses fail within their first year of trading.
Although this figure is probably smaller for dental practices, the perils of running a small business such as a dental practice are very evident. The primary reason behind the majority of failure is poor cash flow management. Therefore, it is imperative you manage your cash flow carefully and in a planned forward-looking manner.
For further information on managing your cash flow for a successful practice, please contact Samera on 0207 100 8788 www.samera.co.uk
There are many ways of minimising (and not eliminating) your tax bill. One of the commonest ways of saving tax for a sole trader or partnership is to convert it into a limited company (a process known as incorporation).
By doing this, you could save a significant amount of tax over a period of time. Through incorporation one can benefit from lower tax rates, better cash flow (since companies do not have to pay tax in advance through payments on account), plus the added benefit of being able to sell your business goodwill to a company you own, and then drawing down the directors loan account over a period of time with minimal or even zero income tax payable.
However, incorporation is a minefield, and needs considerable consideration by an experienced accountant that understands the many implications of incorporating a dental practice. Although there can certainly be some tax benefits, this should not be the only consideration when incorporating.
For further information on incorporation, please contact Samera on 0207 100 8788 or visit www.samera.co.uk/limited_companies.html
In these times of financial hardship, solicitors specialising in the sale and acquisition of general commercial businesses are struggling to find quality work to do but it has not gone unnoticed by them that sales and acquisitions of dental practices has remained relatively buoyant throughout the recession. As a result, solicitors are now more willing to "have a go" in areas that were previously outside of their comfort zone.
A solicitor who has not dealt with a dental practice before will not as a matter of course be used to dealing with such industry specific issues as GDS/PDS contracts and the difference between them. PDS contracts for example do not contain provisions allowing for partners to be added to the contract whereas GDS contracts do. The effect of this is that control of a GDS contract can be transferred through what we refer to as the "partnership route" whereby a new partner is added to the GDS contract followed by the retirement of the existing partner shortly after, thus transferring the contract from one name to another.
Where a PDS contract is concerned however, transfer can only be achieved through either first changing the status of the contract to a GDS contract and then following the partnership route or alternatively by negotiating with the PCT for a new contract to be issued in the name of the proposed transferee. A solicitor specialising in dental practices would be fully aware of this from the outset and your advice would be consistent from beginning to end. A non dental specialist would not be immediately aware of this very important distinction.
Further examples of crucial issues would be the definition and nature of UDAs, the requirements of CQC, provisions regarding Denplan and clauses providing for how uncompleted dental work is to be split between Buyer and Seller. Worryingly however these would not come as second nature to a legal practitioner without previous experience in these areas.
Instructing a solicitor to deal with your practice who does not have prior experience of the law in relation to dental practices can have a number of consequences, none of them good. One possible outcome could be that your solicitor decides to accept the instruction and proceeds ignorant of the specifics of the industry, treating your practice as they would any other business. This can have grave consequences and leave you without the basic protections we would always expect to see in a business sale agreement such as a provision for dealing with an under-performance of UDAs by the vendor under a GDS contract by way of example.
Alternatively, a solicitor without prior dental experience may decide to accept your instruction to carry out the work but resolve to carry out the necessary research in order for them to be able to advise you properly. This however is not without its difficulties as researching the law in this area is no easy task. It is likely to be time consuming and expensive and the solicitor will look to pass all costs for the time they spend on the matter back to you meaning that you could find yourself paying for your solicitor to learn the law as your transaction progresses. Your practice is a valuable asset and you must ask yourself if you would feel comfortable with a solicitor "learning the ropes" on your practice?
Thomas Coates from Cohen Cramer Download PDF
The key is to have a contract in place which includes carefully drafted post termination restrictive covenants. These are especially important for Associates who may be inclined to set up in competition and/or try and poach patients. Restrictive covenants are more commonly known as 'Binding out clauses.' They allow a dental practice owner to prevent competition from an Associate after during or after the associateship ends. In the absence of a written and effective restrictive covenant the employee may compete, solicit the patients/clients/customers and poach staff. In order for a restrictive covenant to be enforceable the clause must be reasonable in time and area and must be no wider than is necessary to protect the practice owner's business interest. A restrictive covenant will not be enforced unless the terms are sufficiently clear. If the clause is unreasonable in time or area it is void and hence unenforceable. The remedy for the practice owner when an Associate is in breach of an effective covenant will be an injunction to prevent the Associate from carrying on a competing business, soliciting patients or poaching staff or damages for any loss suffered. The Associate can also be compelled to hand over copies of lists of patients in his/her possession.
www.cohencramer.co.uk
Sarah Leyland from Cohen Cramer Download PDF
Yes, all dentist who wish to practice dentistry have to be registered with the Care Quality Commission (CQC).
Sellers should ensure that the practice being sold is registered, or at least be able to produce documentation showing that an application for CQC registration has been made. CQC have stated no enforcement action will be taken where the application for registration has been made but has not yet been completed.
For buyers it is important that they are also registered for CQC purposes. Lenders will require evidence that the buyer is registered either by way of a 'letter of comfort' or a 'Notice of Decision' from the CQC confirming the details of the registration and conditions with which the buyer is registered.
Buyers should ensure that they complete and submit the CQC application form correctly; i.e. ensure that the enhanced CRB checks are signed, ensure that all countersignatures are dealt with and all the information requested in the application is provided. Any missing information will cause delay in the process of the application.
To avoid delay it may be simpler and save time if both the seller and buyer either:
In any case the process to transfer the CQC registration will take time and CQC have stated that any application for registration will take at least 120 days to process.
However, complications may arise where a Primary Care Trust is involved. Either way, specialist legal advice should be obtained to ensure that both the NHS Contract and the goodwill attached to it are preserved.
http://www.charlesrussell.co.uk/content.aspx?path=/Services/Healthcare/dental http://www.cqc.org.uk/guidanceforprofessionals/primarydentalcare.cfm
Jenin Khanam from Charles Russell LLP Download PDF
This depends on each individual expense sharing arrangement.
Technically they should both be registered as there are two separate practices. However, on the basis that both are trading from the same premises, some expense share partners may agree between themselves that only one of them needs to register the premises.
There are several choices that can be made for CQC purposes by the expense sharing partners:
Added complications arise if there is a PCT contract involved, in which case specialist legal advise should be sought early to avoid any unforeseen consequences.
If however expense sharing partners decide to have only one registration then indemnities should be sought and proper specialist legal advice will need to be obtained to ensure that adequate protection for both parties are in place.
This information has been prepared by Charles Russell LLP as a general guide only and does not constitute advice on any specific matter. We recommend that you seek professional advice before taking action. No liability can be accepted by us for any action taken or not taken as a result of this information.
It depends.
The length of a lease in comparison to the freehold investment value is the first point to consider.
It may be more cost effective to take on leasehold premises as opposed to purchasing the freehold on the basis that the initial capital outlay would be less. In addition the freeholder retains the responsibility of structural repairs, insurance etc (although the tenant normally pays a contribution towards these costs).
There may be a number of reasons why the freeholder does not wish to sell the freehold. The freeholder may wish to retain the freehold and grant a lease to obtain an investment value yield through rental income or perhaps the freeholder may wish to retain the freehold due to tax reasons.
Most lenders will lend on the security of a long length lease i.e. for a term of more than 10 years and on the basis that there is a legal right to renew the lease at the end of the term.
Some buyers may be reluctant to take a lease on the basis that the freehold would be a better investment for the long term future of their practice. It may be possible to negotiate a right of first refusal if the freeholder later decides to sell the freehold.
The stamp duty land tax payable for a lease may be less than with buying a freehold. Stamp duty on leases is calculated on the basis of the premium (if any) paid for the lease and rent attracted under the lease and could be less than the stamp duty threshold (i.e no duty payable).
http://www.charlesrussell.co.uk/content.aspx?path=/Services/Healthcare/dental
If you look like an employee and quack like an employee, then you are not a self-employed person...
The Supreme Court has confirmed that employment and self-employed contracts must reflect reality. The recent decision now means that an intention to deceive is no longer required for employment or self-employed contracts to be considered a sham.
The Supreme Court held that car valets, whose contracts declared them to be self-employed, are actually employees. The contracts stated, amongst other things, that the car valets could appoint substitutes, that they were not obliged to carry out work, and that there was no guarantee that they would be offered work. These are descriptions that are inconsistent with that of an employee. However the contracts were far from reality. Instead the valets were expected to turn up daily, do the work, and in practice were unable to provide substitutes.
The correct approach is to address what was actually agreed between the parties. This includes not only what was agreed at the inception of the contract, but also at a later stage where the parties may have varied their agreement. The court emphasised the importance of considering the relative bargaining powers of the parties, especially when considering written agreements in the employment context.
Perhaps it is time for you to reflect upon your own employment contract, or the contracts of your staff. What is the true position, and does it accurately reflect what is written down? It may do, but if it doesn't, then "reality" will most likely prevail.
This is of particular concern for hygienists and therapists, whose contracts often state them to be self-employed, when, in reality, they are employees.
If you are concerned about your employment status, or that of your staff, Cohen Cramer will be able to assist you. We specialise in advising Dentists, and are experienced in giving advice in relation to a Dentists/ individual's self-employed status.
www.cohencramer.co.uk and www.bailii.org/uk/cases/UKSC/2011/41.html
Previously, some Dental Associates have incorporated their business in an attempt to reduce their personal tax bills, however there has always been uncertainty as to how Superannuation would be treated.
This has now changed with the publication of the recent 'NHS General Dental Practitioners - Guide To The NHS Pension Scheme (England & Wales)'.
The guide confirms that with effect from 7 November 2011, a Performer who sets themselves up as a Limited Company cannot be a member of the NHS Pension Scheme, subject to Parliamentary approval. Performers who are in this situation are advised to put arrangements in place to ensure they comply with the NHS Regulations if they wish to remain in the NHS Pension Scheme.
This effectively means that Associates should not trade through a Limited Company from 7 November 2011 if they wish to remain in the NHS Pension Scheme.
For further information please contact Andrew Swann at Barber Harrison & Platt, Chartered Accountants (www.bhp.co.uk) on 0114 2667171.
www.nhsbsa.nhs.uk/Documents/Pensions/GDP_Pensions_Guide_(V1)_09.2011.pdf
Andrew Swann from Barber Harrison & Platt Download PDF
These are frequently asked questions relating to the Animal Welfare Act 2006 ("the Act").
A: The Act makes it an offence for anyone responsible for an animal to fail to take reasonable steps to ensure that the following needs of an animal are met:
A: A further offence is committed when a person causes unnecessary suffering to an animal by an act or failure to act. Anyone can be guilty of an offence under this section (i.e. there is no need to show that the person in question was "responsible" for the animal).
There is a separate offence where a person responsible for an animal commits (or does not take steps to prevent) another from causing unnecessary suffering by their actions or failure to act.
A: Local Authorities can appoint inspectors to exercise powers of entry, inspection, search and seizure of records, and emergency powers to deal with animals in distress (i.e. treatment, seizure and destruction).
Rights of entry and inspection exist for most premises although, in relation to dwellings, the rights of entry are generally limited and/or notice must be given before an inspector may enter such premises.
A: Where vets from Animal Health (formerly known as the State Veterinary Service) are unable to provide treatment (other than euthanasia) or ongoing veterinary care (i.e. treatment of animals taken into possession by a Local Authority), private practice vets may be called upon as necessary.
Private practice vets can sometimes offer a specialist expertise in a particular species (eg reptiles) and the private practice vet would then be able to advise on how to alleviate the animal's suffering or provide certification that an animal is in suffering (to allow the Local Authority to take the animal into possession).
Most Local Authorities have lists of local vets that are able to provide assistance, although best practice dictates that they should avoid using an alleged offender's vet for assistance.
For more information please visit Defra, the BBC and www.legislation.gov.uk
There is a common misconception that such "binding out" restrictions either between vets (e.g. Partnership Agreements/Shareholder Agreements) or between vets and their employees (e.g. Employment Contracts) are unenforceable. The Courts view is specific i.e. provided there is a genuine business need and the clause is reasonable both as to its terms, its geographical area and timescale – then the courts will uphold such clauses. The clauses must be properly and fairly drafted, the Courts will view the clause against the vet trying to enforce the obligation i.e. if there is any ambiguity or if it is not clear then the employee (or departing partner or shareholder) will get the benefit of that "mistake".
Points to ensure you insert are:-
Accordingly a well run veterinary practice should always ensure that its legal relations between partners, shareholders and between the practice owners and the staff should always be written and documented, should be regularly reviewed and updated – such documentation should always include enforceable non competition restrictions.
For more information please visit www.gross.co.uk, www.bsava.com and www.rcvs.org.uk
Jonathan Cobbald from Gross & Co. Download PDF
For more information please visit Companies house: www.companieshouse.gov.uk/infoAndGuide/llp.shtml
There are tax implications around most capital investment decisions. The Annual Investment Allowance (AIA), which is a kind of capital allowance, has had a significant bearing upon the method of funding in recent years, but changes are coming in April 2012 which will have an effect. Either way, there is no single answer and funding solutions should be tailored to specific situations and an understanding of the latest legislation needs to be taken into account.
If we look at the impact of the Annual Investment Allowance. In simple terms, a business can currently offset up to a £100K of qualifying expenditure against tax and receive tax relief at 100% in the year of purchase. You can access the AIA if you use loan, HP or cash to pay for the equipment but cannot if you lease. However, in the Emergency Budget on 22 June 10, the new Chancellor announced that the AIA will be reduced to £25,000 from April 2012, so the total benefit will reduce.
Therefore, any veterinary business with profits to shelter would be wise to consider investing in new equipment during 2011 and maximise on their tax savings. As always, we advocate that you seek specialist advice from sector experts in your profession.
For more information please visit www.braemarfinance.co.uk, www.hmrc.gov.uk and www.icaew.com.
Phil Walton from Braemar Finance. Download PDF
Adverse reactions are harmful or unintended reactions to a medicine. Adverse reactions can occur in a number of ways. These include lack of expected efficacy, and reactions not mentioned in the data sheet.
In all cases the reports should be sent to the Veterinary Medicines Directorate (VMD) and also to the manufacturer or distributor of the medicine where known. You will need to provide the name of the product which you think caused the adverse reaction; details of the animals or persons in which the adverse reaction occurred, the adverse reaction and your contact details as the reporter of the adverse reaction. This can be done on-line at the Adverse Reaction Reporting webpage of the Veterinary Medicines Directorate. Alternatively information can be sent by post to the Veterinary Medicines Directorate, Free Post KT4503, New Haw, Addlestone, Surrey, KT15 3BR.
http://www.vmd.defra.gov.uk/adversereactionreporting/
Susan Hunneyball from Charles Russell LLP Download PDF
No. If a pharmacist wants to provide NHS pharmaceutical services (including dispensing prescriptions issued by an NHS GP, for example), the pharmacy premises must be included in a Primary Care Trust's (or Health Board outside of England) pharmaceutical list. There are more than 10,000 pharmacies in England which are included in PCT pharmaceutical lists.
Entry onto a PCT's pharmaceutical list is restricted to pharmacists who can demonstrate that it is either necessary or expedient to grant an application for inclusion in the pharmaceutical list in order to secure, in the neighbourhood, the adequacy of pharmaceutical services (the necessary or expedient test). There is an appeal procedure for dealing with appeals against a PCT's decision.
In England, there are currently four exemptions to the necessary or expedient test: pharmacists who undertake to provide services for at least 100 hours per week, distance-selling pharmacies, pharmacies in a One Stop Primary Care Centre (which has a particular, defined meaning) and pharmacies which will be located in a designated out of town shopping area. There are no such exemptions in Wales, Scotland and Northern Ireland, and it is likely that at least some of the English exemptions will be removed when new control of entry rules come into force in England in 2011.
There are restrictions on the extent to which pharmacies can move once they are included in a pharmaceutical list. In general terms (and outside Scotland, where the rules are slightly different), a pharmacy can only change premises where the move between old and new sites is within the same neighbourhood and is minor. Whether a move is minor is essentially a question of distance, since the PCT is concerned with the effect of the move on the population. However, the PCT will also have regard to physical factors, such as whether there are any barriers between the two sites.
Once a pharmacy premises is included in a pharmaceutical list, it is entitled to be paid for the provision of pharmaceutical services in accordance with the NHS pharmacy terms of service.
You can find out your nearest NHS pharmacy using the search tool at www.nhs.uk.
For more information please visit www.nhs.uk
Noel Wardle from Charles Russell LLP. Download PDF
It is important to plan the sale of your business well in advance of going to the market, so 12 months is ideal. Firstly get all your financial information together, up to date audited accounts and management accounts are essential as are at least 12 months of FP34's. If there is any excess costs that can be driven down in the business then now would be a good time to do it, the higher EBITDA shown in the accounts the higher the price someone will be willing to pay. It would also be a good time to decide which solicitor to use, it is essential to use someone who is experienced with business transfer, the sale of a pharmacy is not just a property transaction. And to start talking to a suitable agent, most of the main pharmacy agents will be willing to come and see you and give their advice as to marketing and value, without charging a fee.
For more information please visit www.orridgesales.co.uk
Jonathan Reakes from Orridge Business Sales Ltd. Download PDF
You will need to get your solicitor to check the original planning application and drawings authorising the medical centre development to see if the pharmacy was shown on those drawings. If it is was, it is likely that the pharmacy is authorised for planning purposes. If not you may need to get planning consent.
Even if the pharmacy is not shown on the drawings you may be able to operate within the health centre if you are operating a purely dispensing pharmacy for processing health centre prescriptions as you are likely to be able to show that your use is ancillary to the main medical centre use and thereby authorised for planning purposes.
If, however, your pharmacy deals with the sale of ancillary products including cosmetics, toiletries and food as well as dispensing prescriptions which is more than a very small percentage of the total business then it is likely that your pharmacy will be construed as a retail pharmacy which falls within a different use class for planning purposes.
A retail pharmacy has a use under Class A1 of the Town and Country Planning (Use Classes) Order 1987 (the "Order") whereas a medical centre falls within Class D1 of that Order. You can not inter change between those two use classes without planning permission. So if your use is as a retail pharmacy then you will need specific planning permission to allow this.
Even if you are operating just a dispensing pharmacy you must check whether the planning permission contains any conditions which could restrict your use of the pharmacy. Some planning permissions contain conditions limiting the hours that the pharmacy can operate which may be inconsistent with the terms of your NHS Contract. If there is such a condition then you would need to get the local authority to approve a change to the condition so that you could open at the times you need to.
Many pharmacies also need to erect external signage such as the pharmacy logo as well as trading signage. If this signage has not already been authorised by the existing planning consent then further planning permissions will need to be applied for from the local authority to allow it.
It is essential that any pharmacist checks that the proposed use of the premises and any external alterations are authorised for planning purposes. Failure to do so could result in the planning authority taking action to stop a use which it considers in breach of the authorised planning use which could result in the pharmacy having to close, or requiring the removal of unauthorised alterations.
The above is a general overview and we recommend that independent legal advice is sought for your specific concerns.
For more information please visit www.charlesrussell.co.uk/content.aspx?path=/services/real_estate/planning and www.planningportal.gov.uk
Claire Timmings from Charles Russell & Co. Download PDF
The headline price quoted for a pharmacy will either be for the shares in a company or, where the assets are being sold, for the benefit of goodwill to include trade equipment, fixture and fittings. Possible additional purchase costs are:
Everyone starts with a dictionary definition: in its simplest form, it is considered to be a valuable asset based upon the good reputation of a well established business.
Purposely omitted from that definition is the word intangible. If it is so difficult for the mind to grasp, it is no wonder that in the distant past some banks failed to comprehend the concept of a customer borrowing funds to acquire such an intangible asset. Times change and nowadays a bank will not only provide funds to purchase the freehold interest in property but they will also advance quite large sums to enable a customer to buy goodwill.
Goodwill is really the right to continue to enjoy future profits generated by the previous owner's reputation i.e. the business has previously enjoyed a level of customer satisfaction such that these customers will return to the premises and continue to use the services provided by the business after the former owner has vacated possession.
Almost all retail businesses on the High Street will command some level of goodwill, though it would also be true to say that the more professional and secure the operation, the higher degree of certainty that customers will return and those profits will continue to be enjoyed by the purchaser. In the case of pharmacy businesses (given that there are certain exclusions which will allow some level of competition) these are somewhat protected by the Control of Entry regulations as they have existed and hence the level of certainty of income is increased, leading to a higher goodwill paid by the acquiring party.
Does Goodwill = Price? Essentially, yes it does, except we will argue with accountants (for both sides) that the price can also include other assets such as trade equipment, fixtures and fittings which are clearly tangible and do not fit the dictionary definition but they are an essential part of running the business and it could be argued that the business could not continue to operate without these assets being transferred to the purchaser at the time of completion.
Certain medicines may only be supplied by or under the supervision of a pharmacist from registered pharmacy premises by a person who is "lawfully conducting a retail pharmacy business".
There are restrictions on who may lawfully conduct a retail pharmacy business. The Medicines Act 1968 contains a definition of "lawfully conducting a retail pharmacy business" in sections 69 to 71. Only an individual pharmacist, a partnership of pharmacists or a body corporate may be "a person lawfully conducting a retail pharmacy business".
In the case of a body corporate, the company must have a Superintendent Pharmacist ("the Superintendent"). The person who holds the position of Superintendent may not be the Superintendent of any other company and the company must register the Superintendent with the General Pharmaceutical Council (the GPhC) using the appropriate form.
In addition, in order to be lawfully conducting a retail pharmacy business, the Medicines Act requires a Responsible Pharmacist to be in charge of the business at the premises so far as concerns the sale or supply of all medicines (including medicines on a General Sale List). The Responsible Pharmacist is subject to the directions of the Superintendent.
Each individual pharmacy premises must be registered with the GPhC. There is a fee for registration and an annual fee to remain on the register. The pharmacy premises will be regularly inspected by a GPhC inspector. There are currently no minimum requirements or standards for registered pharmacy premises (for example as to size or facilities).
You can check whether a pharmacy (or a pharmacist) is registered with the GPhC using the search tool on its website – www.pharmacyregulation.org.
For more information please visit www.pharmacyregulation.org.
If you own a pharmacy business operating under the rules governing a 100 hour contract exemption, you might be wondering what it might be worth in today's market. How long is a piece of string?
Pharmacies working 100 hours a week are as varied in terms of profitability as are other pharmacies operating more normal hours, whatever that word 'normal' might mean. There are 'standard' hour pharmacies which open from 08:30 in the morning till 19:00 at night without a break on a six day week and there are those that open more leisurely hours from 09:00 till 17:30, close for lunch, take half day off on Wednesday and they do not open on Saturday or Sunday. If turnover and profitability were roughly the same in each of these examples, there are no prizes for guessing which would be the more attractive if offered to the market. The 'price' would clearly reflect that one would offer the prospects for more 'down time' or time to spend with the family – or on the golf course!
Regardless of opening hours, a business will 'own' a value attributable to goodwill, dependent upon its profitability generated after all expenditure has been deducted from Gross Profit.
In the case of 100 hour contracts, that 'expenditure' will inevitably contain a higher percentage of costs as a result of wages paid to two or more pharmacists than for core hour businesses and if the business has a busy counter trade, then there is every likelihood there will be a greater outlay for two or three times as many counter assistants, especially if unsociable hours are worked. It is particularly this higher wage bill that results in a lower goodwill to turnover ratio than generally applies to other pharmacy businesses.
As most 'average' pharmacy owners are quite willing to cope with dispensing say, 5,000 to 6,000 Items per month without the need to employ a second pharmacist, even on a part-time basis, it is hardly surprising that they also believe a 100 hour contract business is not really worthy of their consideration (for acquisition) until it has surpassed 7,000 Items per month or more.
Your 100 hour contract will probably have a goodwill value, just do not try comparing it with your neighbour's pharmacy who opens for 54 hours per week. They will not be worth the same figure.
The valuation and purchase of pharmacies is a specialist business. They cannot automatically be considered as comparable with other retail units. This is especially true for pharmacy units situated in close proximity, or attached, to a medical centre.
The rental value for a property is related to the earning capacity from competing businesses that could operate from the premises. This concept is common to a wide range of commercial properties, with public houses adopting rents based on barrelage, petrol filling stations linked to throughput, and retail units reflecting their display frontage through a zoning method, with the respective rental levels indirectly linked to footfall.
Retail premises depend on customer spend, and for conventional retail units the rents reflect the ability of the unit to attract customers reflecting display frontage and the situation of the property and the quantity of passing customers. This has led to the majority of rental units being valued on a zoned approach. A dispensing pharmacy is different, with the majority of the income stream derived from the provision of medicines prescribed to patients as opposed to their business being based on over the counter retail sales.
The business is reliant on prescriptions and the ability to secure patient scripts. Therefore the attraction of premises in close proximity to a GP surgery is obvious as the operator can secure a large percentage of the prescriptions issued from the surgery.
However, the pharmacy market is not an open one and and in essence there is control of entry under the NHS (Pharmaceutical Services) Regulations 2005 (as amended).
These regulations, with the further provisions under the Health Act 2009, provide the guidance for PCTs to ensure adequate pharmaceutical services in a particular neighbourhood.
The regulations also require the PCT to make fitness to practice checks before an operator can be paid for providing NHS services. These regulations limit the number of operators, which creates a premium value for pharmacy businesses/premises.
The control of entry provisions will impact on property value, not only at the outset of a new letting, but also on rent review, depending in part on the actual wording of the lease. The value is clearly enhanced where it can be anticipated that there will be competing demand. However, with control of entry, the demand may be limited and this will impact on rental values.
There are four exemptions to the "control of entry" regulations, but the only one which materially impacts the valuation of pharmacy premises is where a pharmacy intends to open for at least 100 hours per week. Potential competition from a 100 hour pharmacy is only likely to exist with regard to larger medical centres because their financial viability is reliant on the need to secure a significant number of prescription items.
Another area where competing demand can be envisaged is the possibility of minor relocations under the regulations which bypasses the necessary or expedient test. Each pharmacy unit has to be looked at individually as the circumstances in terms of the potential competition will be unique.
The pharmacy market is a specialist field and consideration must be given to the drafting of leases, the terms of the lease and the circumstances of the property to ensure the correct rent on review.
www.pharmacyregulation.org, www.chemistanddruggist.co.uk and www.thepharmacist.co.uk
Andrew Hues MRICS from Aitchison Rafferty Property Consultants. Download PDF
The goodwill in a business is its reputation and in a care business the reputation is borne out through the quality of care provided by staff.
Your investment as a care business owner in training and developments should allow your staff to rise through the business and become senior managers. In order to safeguard the investment that you as an owner make in training and developing your staff it is sometimes a good idea to incentivise a small number of key staff to remain with you and grow your business further.
Incentives for staff at all levels can vary and can include Christmas bonuses or even team building events.
However, to incentivise key senior staff who may be driving the growth and value of the business, incentives can include benefits, bonuses, Phantom Share Schemes, Share Options and other schemes all with the purpose to retain your staff for long periods and providing a monetary reward in the future.
The tax treatment of these different schemes will depend on the type of business, for example some of the more efficient are not available to registered care homes but may be available for domiciliary care businesses.
For more details please contact Adrian Randle at Hazlewoods on 01242 237661 or Adrian.Randle@hazlewoods.co.uk
Adrian Randle from Hazlewoods LLP. Download PDF
Extending your care home is a great way to increase the number of residents at your home and hence revenue, but you must be careful because it could be very costly.
You need to do the following:
Stuart Bailey from Thomas Guise Solicitors. Download PDF
As regards your new build – as from 1 October 2010 all new buildings are required to reduce carbon emissions by 25% compared to one built prior to 1 October. There will be a change to Building Regulations in 2013 requiring a 44% reduction in carbon emissions followed by a full zero carbon specification for commercial buildings from 2019.
The effect of these provisions will be that from 2019 all new buildings will have to be built to be extremely energy efficient and will need to generate a significant amount of energy "on-site".
Consequently, it will be very important to factor in the cost implications of meeting these new requirements for your proposed new building as they could significantly increase build costs. These initial build costs could easily increase by a further 10% from 2013 and 20% by 2019. Whilst much of this extra cost will be off-set by the fact that the buildings will have lower running costs, these up-front additional costs are significant.
We can advise on the construction process and have links with specialists who are fully up to date with the new regulation's requirements.
As regards your existing buildings, although there are no plans at present to force energy efficiency on existing buildings (unless you are a very high energy user and fall under the new CFC energy efficiency scheme) making your existing buildings more energy efficient can be very beneficial. We can arrange for a review of your building's energy efficiency to be carried out and recommendations for possible improvement made. Such improvements can increase the attractiveness of the building itself and by reducing running costs, can also increase profitability and the value of the business.
Julie Pope from Berryman. Download PDF
When a care business is bought there are a number of areas and aspects of the business that should be reviewed to ensure that the correct price is being paid. Simply obtaining a valuation may not identify all of the keys risks in the business and in many cases legal and financial due diligence should be undertaken.
Areas of review are varied but should include:
In addition to due diligence, there should be a constant review of the performance of the business in the run up to a sale. For example decreased occupancy or increased staff costs may indicate that the profit levels are not sustainable.
For more information on purchasing a business, please call Andrew Brookes at Hazlewoods on 01242 237661 or Andy.Brookes@hazlewoods.co.uk.
Andy Brookes from Hazlewoods LLP. Download PDF
Selling your business to realise the value you have built up over a number of years may only happen once. Therefore the build up to a sale should be planned well in advance.
Preparing a business for sale should not be undertaken in two to three months before you wish to exit, it should be planned over twelve to twenty four months if not longer.
Often a business may need to be restructured in some way to ensure that the owners receive the most efficient tax treatment on exit. Entrepreneurs Relief is currently attractive at 10% for the first £5 million of lifetime gains, but there are qualifying criteria.
Certain restructuring options may require at least twelve months prior to the eventual sale.
In addition, a business is sold on its profitability at the point of sale and therefore planning in advance provides a good opportunity to review the various costs and to benchmark your business against others to ensure that any areas that could increase the sale price can be explored.
Finally, planning a sale in advance allows you the opportunity to prepare all of the information you may need in the due diligence process and should avoid any nasty surprises.
For more information on preparing businesses for sale, please contact John Lucas on 01242 237661 or John.Lucas@hazlewoods.co.uk.
John Lucas from Hazlewoods LLP. Download PDF
There are a number of options for the structure of your business, including sole trader, partnership, limited company, limited liability partnership (LLP) and even public limited company (PLC).
There are benefits and drawbacks to many structures, although the majority of care businesses are becoming limited companies.
The reasons to operate as a limited company are numerous and should not be reviewed as independent factors but more appropriately as a combination.
As the name suggests, the first reason is in the name - limited company limits the liability of the shareholders (or limited by guarantee for not-for-profit organisations).
Other areas include:
For new companies, particularly care companies, this matter should be addressed early because for a sole trader or partnership to change into a limited company later in life a new CQC registration will be required and capital gains tax may be payable.
To discuss further please contact Mark Tibbert on 01242 237661 or Mark.Tibbert@hazlewoods.co.uk
Mark Tibbert from Hazlewoods LLP. Download PDF
If you run your own business it is always important to plan ahead. If you are in good health and of sound mind it may be difficult to imagine a time when you might need help managing your financial , property or business affairs. But what if an accident or illness renders you mentally impaired and unable to manage your financial affairs?
If you haven't made legal arrangements for someone to act on your behalf, your assets will be frozen and your family would need to make an application to the Court of Protection to handle your affairs. This is a costly and lengthy process which is far from ideal, particularly if you and your family are dependant upon the income from the business you are no longer able to run.
A far better option is to appoint a trusted friend, family member or professional whilst you have mental capacity to act on your behalf in case the worst should happen. This can be done by making what is known as a Lasting Power of Attorney document("LPA") . It is like a kind of insurance policy to safe guard your property, business and financial affairs. A solicitor can draft the LPA for you and typically this will cost a few hundred pounds.
The document must be registered at the Office of the Public Guardian before it can be used and the fee for this is £120 , though various exemptions and remissions can apply. Not only is the cost of putting an LPA in place marginal compared to the costs involved in applying to the Court of Protection, but the document can be registered in advance so it is ready to use when you need it, saving your family heartache and ensuring your business is carried out in accordance with your wishes.
Shelley Bonney from Thomas Guise Solicitors. Download PDF
Until recently, the answer was "no". Now the Health and Social Care Act 2008 is in force, the answer is "it depends".
CQC says that if the buyer is a limited company, its application to be registered provider must be accompanied by an application for re-registration of the manager. Where the buyer is a sole trader or partnership, CQC still expects the manager to be re-registered, unless the buyer (where s/he is a sole trader) or one of the buyers (where they are in partnership) intends to be in full-time, day-to-day charge of the care home.
This may surprise you. It has certainly caught out a number of experienced operators currently buying or selling care homes.
In fact, there is some dispute over whether CQC has correctly interpreted the Health and Social Care Act 2008 and the associated Care Quality Commission (Registration) Regulations 2009. The Act and the Regulations say that where a buyer is a limited company or a sole trader or partnership not in full-time, day-to-day charge of the care, the buyer's registration as provider is subject to a "registered manager condition".
A "registered manager condition" is a condition that the buyer must have a manager for the regulated activity (or activities) to be carried out at the care home. What is not clear is whether the Act and the Regulations are referring to the regulated activity carried out by the buyer (i.e. the buyer and manager are linked together) or the regulated activity of the type carried out by the buyer (i.e. the buyer and manager are not directly linked).
CQC has taken the narrower interpretation, which means that the manager must re-apply to manage the same activities, at the same location, each time there is a change of provider. Interestingly, the registration certificates for managers do not specify a provider, which points to a lack of consistency in the interpretation of the legislation within CQC.
Our own view is that CQC has interpreted the legislation incorrectly. It seems odd that the Health and Social Care Act, which was heralded as a simplification of the old regime and promised a streamlined registration process, has in fact produced a more time-consuming, costly and bureaucratic system.
However, until Parliament re-assesses the impact of the legislation, the ambiguity will remain. This means that for the time being, buyers will need to make sure that in the vast majority of cases, an application to be registered as provider is accompanied by an application to re-register the existing manager.
Sellers who were trying to keep the sale quiet, on the other hand, will need to think carefully about how to contain things. Our employment team can offer practical advice on ways to do just that.
Tom Bartley-Smith from Thomas Guise Solicitors. Download PDF
At an early stage, cost consultants can assess your requirements and constraints in detail, to conclude whether the project is achievable. Your bank may appoint its own professional and legal advisors to advise the bank on the specific conditions to be satisfied by you before providing a loan.
By nature, construction projects are complex. A key feature of the UK construction industry is its reliance on standard form contracts to deliver purpose-built solutions to client needs. These forms simplify the process of engaging a contractor by removing the need to negotiate every term of the contract whilst maintaining a degree of flexibility. The standard form contracts usually fall within one of three categories:
Design and build procurement is a common approach as it offers a single point of responsibility against the contractor. The contractor may appoint specialist designers or sub-contractors to carry out design, but you can ensure the contractor will be ultimately responsible.
You may need your own team of professional consultants, whose disciplines will vary depending upon the size and complexity of the project, to check and monitor the contractor's progress. As a minimum, employ an experienced "hands on" project manager to co-ordinate the project, the contractor and the rest of the design team.
A number of industry professional bodies produce standard form services and/or terms of engagement for consultants. These forms should be avoided as they do not adequately balance the interests of a professional consultant and the client. Banks will not accept the use of such standard forms on the basis that these try to limit or "cap" the consultant's responsibility for defective designs.
There are many parties involved in the project who will be asked to design or carry out the work. Legally, this causes a problem due to the well-established principle that only a party to a contract can take benefit of that contract.
The construction industry has overcome this problem with 'deeds of collateral warranty'. These deeds create a direct line between you and the designer. If warranties are required, which is usually a condition to funding imposed by banks, it is critical for you to ensure that such a requirement is included within the contractors' contract or consultants' conditions of appointment, and agree the form of the deed of collateral warranty.
The key to a successful project is to get good advice early. There are many pitfalls when developing a project, which with sound advice from professional and legal advisors can be identified and overcome at an early stage, hopefully with minimal costs and delay.
Richard Brackenbury from Berryman Healthcare. Download PDF
Care home values are very much related to the home's trading performance and whilst a home may experience a reduction in turnover due to falling local authority fee levels, it's profitability can often remain static through "tightening of belts" and improved top ups.
The rise in wages and VAT is likely to make this task more difficult and may require a comprehensive review of costs by the home owner. A declining profit can result in a lower value and it is therefore imperative that the home increases the quality of its product over and above the competition which will differentiate it from other inferior homes, which in turn will create a stronger demand and thus retain its market value.
Kieren Cole from Knight Frank LLP. Download PDF
Firstly I would like to point out that the care sector is one of the most highly regulated industries in the UK.
A new buyer must start by researching the whole sector in detail and its best to seek good advice from CQC (The Regulatory Body), funders, agents, solicitors and accountants. There are many considerations and risks involved in owning and operating a care home; whilst many first time buyers see it as "a property backed business with excellent profits" the risks are high legally and financially. With these risks being bourn in mind many buyers do acquire their first home and then expand with further units – it is proven that the Long Term Care Sector is a growing one given the demographics however many operators have had issues. Seeking the right sort of advice from specialist professionals is key.
Anita Allen from D C Care. Download PDF
Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) the seller has a duty to arrange the election of Employee Representatives and then inform and consult them about the proposed sale. If you fail to do so an Employment Tribunal may award up to 13 weeks pay to each affected employee who complains.
The Employee Representatives, once elected, have to be given prescribed information about the sale, including the proposed completion date and the identity of the purchaser. If the purchaser intends to implement "measures" affecting the employees then there has to be a process of consultation with the Employee Representatives.
The election and informing process is unlikely to take less than 3 weeks. Remember all employees have to be given the chance to stand for election and vote. This includes those on holiday or absent through illness.
The consultation process may take longer depending on the "measures". Consultation can only start once the Employee Representatives have been elected. A meaningful consultation is unlikely to take less than 2 weeks on top of the 3 weeks for the election and information process.
Therefore the TUPE process should start at least 5 weeks before the anticipated completion of the sale. These estimated times relate to a single site non-union business employing up to say 35 employees. For other businesses longer may be required.
www.thomasguise.co.uk, www.acas.org.uk and www.businesslink.gov.uk.
Geoffrey Ellis from Thomas Guise Solicitors. Download PDF
It depends what it is that you are purchasing. If you are purchasing the shares in a Limited Company, then your ability to dismiss the staff concerned (once you take control) will depend upon whether they are currently the subject of any disciplinary or performance procedures. If not, then you will have to progress through the usual stages and employment law considerations need to be borne in mind.
If you are purchasing just the property/business and not the shares, then your purchase of the care home constitutes a "relevant transfer" within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 2006, commonly known as TUPE.
The care home employees will preserve their existing contractual terms and will preserve their continuity of employment. If they have more than 1 year's service, they are entitled not to be unfairly dismissed. A dismissal on the grounds of capability will only be fair if reasonable procedures have been complied with. You should seek specialist legal advice.
Hilary Campion from Berryman Healthcare. Download PDF
For more information on preparing businesses for sale, please contact John Lucas on 01242 237661 or John.Lucas@hazlewoods.co.uk
For more details please contact Adrian Randle at Hazlewoods on 01242 237661 or Adrian.Randle@hazlewoods.co.uk.
www.braemarfinance.co.uk, www.hmrc.gov.uk and www.icaew.com
