Notional rent clawback happens when NHS England or your ICB decides that some or all of the rent reimbursement your practice has received for premises you own was not properly due, and seeks to recover it. This most commonly arises where a practice hosts a third party, such as a federation clinic, a pharmacy, or another NHS service, without properly declaring or structuring that arrangement, and the commissioner treats income from it as reducing the practice’s entitlement to reimbursement.
This article explains how notional rent works, why clawback risk arises, and the practical steps that reduce exposure, particularly for practices considering bringing additional services into their premises. It sits alongside our wider work advising GP practices on premises and contractual issues.
How notional rent reimbursement works
Where a GP practice owns its own premises, rather than leasing from a third-party landlord, it does not receive rent in the ordinary sense. Instead, it receives a notional rent reimbursement intended to put the practice in a broadly similar financial position to a practice that leases equivalent premises. This is assessed by reference to the Current Market Rent (CMR), the rental value the premises would achieve on the open market under a set of notional lease terms (commonly a 15-year term, with the tenant responsible for internal repairs and the landlord for external and structural repairs and insurance).
The legal basis for this framework was, until May 2024, the National Health Service (General Medical Services – Premises Costs) Directions 2013. These were replaced by the National Health Service (General Medical Services – Premises Costs) Directions 2024, which came into force on 10 May 2024. All rent reviews now proceed under the 2024 Directions, whatever framework applied when the arrangement was first set up. We cover the broader premises reimbursement framework, including borrowing costs as an alternative to notional rent, in The NHS Premises Costs Directions Explained.
Where clawback risk actually comes from
The single most common trigger for notional rent clawback is a practice generating additional income from its premises without correctly declaring or structuring that arrangement. This typically arises where a practice:
- Hosts a GP federation clinic, an out-of-hours service, a PCN-run enhanced access hub, or a private clinic within its building.
- Charges a flat service charge to a third party for shared use of rooms, reception, utilities or facilities, without itemising what that charge actually covers.
- Receives income from a pharmacy or other commercial tenant operating from part of the premises.
Specialist primary care premises surveyors have flagged this as a recurring issue since the 2013 Directions came into force: where a flat service charge is not properly itemised, the commissioner may treat some or all of it as premises income, which then reduces the notional rent the practice is entitled to have reimbursed. Because notional rent reimbursement is typically reassessed periodically, including whenever a practice submits an updated CMR1 form, an under-declared or poorly documented third-party arrangement can result in a retrospective reduction, and a demand to repay the difference for the period it was overpaid.
This is a genuine tension for practices, because NHS policy generally encourages practices to operate as a “one-stop shop” hosting a wider range of services, while the NHS reimbursement rules can penalise practices that do this without careful structuring. The answer is not to avoid hosting third parties, but to document the arrangement properly from the outset.
What changed under the 2024 Directions
The 2024 Directions made several changes directly relevant to clawback risk and to practices sharing premises with third parties:
| Change under the 2024 Directions | Practical effect |
|---|---|
| Formal clawback provisions for overpayments | The Directions now expressly cover recovery where payments were made in error, where entitlement criteria were not met, or where a reimbursed charge is later refunded to the practice by a third party |
| Requirement to consider multi-functional use | Practices and commissioners must now consider whether opportunities exist for additional, multi-functional use of the premises, formally acknowledging shared use rather than treating it as exceptional |
| Reimbursement for third-party sharing agreements | For the first time, practices can seek reimbursement of the costs of putting formal agreements in place with third parties sharing the premises |
| New notional rent abatement thresholds | Where an improvement grant has been received, the period over which notional rent is abated is now tied to graduated thresholds (for example, 6 years for grants under £144,000, up to 18 years for grants of £1.2 million or more), an improvement on the flatter 15-year rule under the 2013 Directions |
| Wider pool of valuers | Commissioners can now take rent advice from any suitably qualified RICS-registered valuer, not only the District Valuer, potentially speeding up disputed reviews |
Reducing the risk before you take on a third party
If your practice is already hosting a third party, or is considering doing so, the following steps materially reduce the risk of a later clawback demand:
- Get a fully itemised service charge schedule in place before any income is received, clearly separating what relates to premises occupation, what relates to shared services (utilities, reception, cleaning), and what relates to anything else.
- Take specialist premises advice before submitting a CMR1 form where a third-party arrangement is already in place, so the income is explained accurately and consistently with how the commissioner is likely to assess it.
- Use the new reimbursement route under the 2024 Directions for the cost of putting a formal sharing agreement in place, rather than treating documentation as an unfunded overhead.
- Keep the paper trail, correspondence with the commissioner about the arrangement, any confirmation received about how it would be treated, and copies of all CMR1 submissions, since this is exactly the evidence needed if a clawback demand is later challenged.
If a clawback demand is received despite these precautions, the practical and dispute resolution steps are the same as for any other NHS clawback claim: verify the calculation, check which period it covers against the general six-year limitation period for recovery of a simple contract debt, and consider whether the formal NHS dispute resolution procedure is the right route if entitlement itself, rather than just the repayment schedule, is genuinely in dispute. We set this process out in full in NHS Clawback: Can the NHS Reclaim Payments Already Made to Your Practice?
What This Means for Your Practice
Notional rent clawback is largely a documentation problem wearing a valuation problem’s clothes. The underlying commercial activity, hosting a federation clinic, a pharmacy, or a shared service, is usually entirely legitimate and often actively encouraged by NHS policy. The risk arises when the paperwork does not clearly separate premises income from everything else, leaving the commissioner free to interpret it unfavourably at the next review. Getting the structure and the lease or licence documentation right at the outset, ideally alongside your surgery lease arrangements more broadly, is far cheaper than disputing a clawback demand after the fact. We look at how GP surgery leases differ from ordinary commercial leases, including how third-party occupation should be documented, in GP Surgery Leases: Why They’re Different from Ordinary Commercial Leases.
We advise GP practices on structuring premises income, third-party sharing arrangements, and disputing notional rent clawback demands. If you are planning to bring a new service into your premises, or have received a clawback notice relating to your notional rent, speak to our commercial property team or call us on +44 207 566 1188, or email info@gurvelegal.com.
