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4 Steps to Consider When Setting Up a PCN Company

on Wednesday, 08 July 2020.

With year 2 of the Network DES now underway and PCNs now more heavily involved in service provision, frequently asked questions have turned again to the possibility of setting up a corporate vehicle to assist PCNs.

GP Federations can often fulfil the functions that such a company would offer but in some instances this may not be available.

If your PCN is considering setting up a corporate vehicle, here are 4 key steps to consider:

1) 'Form Must Follow Function'

The Network DES is part of each participant practice's primary medical services contract and that the PCN itself is a contractual joint venture between those practices. As with approaching any collaboration, the mantra of 'form must follow function' is an important consideration and the practices should consider carefully the purpose of any incorporated vehicle. Whilst the vehicle could act as a subcontractor to the PCN's practices, the most common requested purpose has been to act as the employer of the reimbursed staff.

The use of a corporate vehicle can provide some protection for practices around liability and potentially could be used as a vehicle to provide clinical services either via a subcontract or (should commissioning strategy turn to funding PCNs through a separate APMS contract) a contract holder in its own right. This would necessitate a separate CQC registration however.

2) NHS Pension Scheme - Employing Authority

One of the key obstacles to PCN's wishing to set up a company to employ reimbursed roles has been access to the NHS Pension Scheme, since without a clinical contract, the company would not be eligible to be an "employing authority". In October 2019, NHS BSA released guidance on their website indicating that a company fulfilling this role may be eligible to apply for NHS Direction/Determination status (only until 2021). We understand that this guidance is being updated and extended to 2022, during which time a more permanent solution may be consulted upon.

Specifically, the guidance indicates that access to the NHS Pension Scheme is conditional on the employed staff directly assisting in the performance of GMS/PMS/APMS/PCN/ARRS. It should be noted that primary medical services sub-contractors would not normally be eligible to be an employing authority in respect of that subcontract alone. 

3) Governance

A PCN company will need its own corporate governance and particular consideration needs to be given to the company's articles of association (its constitution); and any private agreement between the shareholders governing their relationship and how the business will be managed. The company's governance structure and the relationship between its shareholders is likely to reflect the operating terms of the Network Agreement of the PCN. The parties will also need to consider whether the company should become a non-Core Network Practice Member to the PCN Agreement.

4) VAT Cost Sharing Group

In cases where the staff are employed by a PCN company and the staff themselves supplied to the PCN's practices, this can potentially trigger a VAT liability. It is important to take advice from a specialist medical accountant around thresholds and available exemptions. The possibility of creating a VAT cost sharing group has been one of the key considerations around resolving this and specialist advice should be taken. We are working closely with specialist medical accountants in relation to support packages to help advise on and set up cost sharing groups.

If you would like to know more about PCN companies or would like assistance in setting one up, please contact Mark Jarvis in our Healthcare team on 07469 850 489, or complete the form below.

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