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How Best to Structure Primary Care Networks

on Tuesday, 14 May 2019.

A key concern about the introduction of Primary Care Networks (PCNs) is that there could be a VAT charge arising on the supply of network staff, ie social prescriber, clinical pharmacist, etc. from whoever employs them, to others in the network.

Can PCNs be structured in such a way as to avoid this happening?

Following our recent attendance at ICAEW Healthcare Conference on 8 May 2019, we have set out some further thoughts about potential solutions to the concern about VAT:

  • Joint contracts of employment for network staff
    This will mean that staff members would not be "supplied" from one practice to another. But joint contracts of employment pose plenty of their own problems - they are unorthodox, difficult to manage and cause problems with returns to NHS pensions.                                                         

  • Staff-sharing arrangements
    These could be set up in such a way that they represent a supply of clinical services (non-VATable) rather than a supply of staff (VATable). This probably won't work with all types of staff (for example, social prescribers who aren't registered healthcare professionals) and how the relevant contracts are drafted would need close coordination between the lawyer and the accountant.

  • Using the federation as a VAT "cost-sharing group" to employ staff
    This could work quite well if the federation has the right sort of primary care contract and can offer the NHS pension scheme to its employees. Careful accounting would be needed to ensure no profit is made on that element of the federations' activities, otherwise it cease to be eligible as a CSG.   

  • Establishing a separate vehicle for the same purpose
    This won't work in the short term as the new company itself won't be eligible to offer the NHS pension to the staff, but the rules on this could change over time.                                                                                                         

Our Recommendations

Although VAT may be an issue next year, it should not be a problem in the first year because employing a social prescriber and a clinical pharmacist will not be enough, in most cases, to push the lead practice over the VAT registration threshold (bear in mind though that once additional staff are employed in future years, it certainly will become a live issue). It also seems likely that the rules will change and develop over the coming year.

With both these things in mind, our suggestion is that you set things up as simply as possible for now and keep a "watching brief" on how you may need to adjust your structure ahead of next year. We feel it is better to do this than to spend time and money on a structure, which may prove not to work when the rules change, and which then has to be unpicked. We at VWV will continue to let you know what we think the options will be as things develop.

In the meantime, practices will need to submit their draft network agreements with schedule 1 completed to their CCG by 15 May 2019. They will then need to complete their network agreements, and all the schedules before 30 June 2019.


The network agreement gives rise to important legal obligations, and advice should be taken on what they should say. For specialist advice on these documents, or any questions about PCNs, please contact Oliver Pool on 0117 314 5429, or complete the form below. 

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