How GP practices are dealt with on divorce or civil partnership dissolution

Here is a reminder of how businesses are approached on a divorce or dissolution, Key issues for business owners in divorce settlements | Weightmans, and below is a summary of issues specific to a GP practice:

1. Ownership and business structure

• if one or both parties own a stake in a GP practice, the structure of ownership, (e.g. sole trader, partnership, limited company), will influence how it is treated in the divorce, from its value to practical considerations for the future Business assets on divorce: impact of business structure | Weightmans
• if the practice is a partnership, a partnership agreement may have clauses addressing what happens in the event of a divorce or dissolution Divorce and Dissolution: What is a partnership? | Weightmans and How partnerships are dealt with on divorce or dissolution | Weightmans
• relevant provisions may also be found in the incorporation documents for a limited company or in any nuptial agreements entered into by the parties Key issues for business owners in divorce settlements | Weightmans

2. Valuation of the practice

• the practice, (or a party’s share in the practice), is an asset which may be included in the matrimonial pot to be divided on divorce or dissolution of a civil partnership. It therefore needs a valuation figure. A forensic accountant on a single or joint instruction may be required to produce an expert valuation report
• the valuation will take into account the value of premises, stock and any working capital
• other factors will include goodwill, property ownership, patient lists, earnings, and liabilities
• goodwill can be a contentious issue and we explore this below
• for more information see Business valuations on divorce or dissolution | Weightmans

3. Value and treatment of NHS contracts

It is crucial to understand the unique nature of NHS contracts and to distinguish them from other business assets.

GMS, PMS, and APMS contracts: key distinctions

There are three primary types of NHS contract under which GP practices operate:

• General Medical Services (GMS) and Personal Medical Services (PMS) contracts are standard contracts used solely for providing primary care services. These contracts are not owned by the individual GP so they are not a personal asset. They are held by the practice partnership and therefore belong to that entity holding the contract. They are non-transferable in the open market and are governed by strict regulatory frameworks
• Alternative Provider Medical Services (APMS) contracts are more flexible and can be used for a broader range of services, including some outside traditional primary care. They may be held by private companies or individuals. They are also limited in terms of transferability but may in some cases involve services or structures that carry a goodwill value. If a GP owns a company operating under an APMS contract it could be treated as a business asset and valued accordingly
• the court will consider the GP’s income from the contract when calculating maintenance or how the assets should be divided. As these contracts are not permanent, future earning potential is also considered.

Goodwill and NHS regulations

Goodwill in NHS contracts is generally not recognised for valuation purposes, especially for GMS and PMS contracts. It will likely be valued at nil. NHS England’s guidance and regulatory framework prohibit the buying and selling of goodwill in relation to these contracts. This reflects the idea that core NHS services should remain publicly funded and accessible by everyone.

Passing and retaining GMS contracts

The passing of a GMS contract typically occurs by variation of the partnership agreement, with approval from the NHS. A departing partner may assign their interest in the practice partnership, but this does not involve a transfer of the contract itself, and the contract remains with the continuing partnership. If moving to a new practice they will work under the contract held by that practice.

4. Pensions

• many GPs have substantial NHS pensions which may be subject to pension sharing or offsetting in the financial settlement
• pension valuations, particularly NHS pension schemes, require specialist pension advice as the cash equivalent value is not always accurate
• for more information see Pension sharing on divorce | Weightmans