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Reimbursement reduction

Q: Is our PCT correct in stating that our cost rent premises reimbursement includes an element for site value?

A: We wish to build a private healthcare facility on part of our NHS surgery's site and, if we go ahead, the PCT says it will abate part of the cost rent.

There are various elements to the formula for calculating cost rent (now called 'borrowing costs') reimbursement, including an allowance for the site's value as approved by the district valuer.

The appropriate rate of interest is then applied to the total of these elements to produce the annual reimbursement amount.

Any change in the initial arrangement you made with the PCT gives it the opportunity to re-consider the reimbursement. This could lead to it arguing that the borrowing costs basis should be withdrawn and reimbursement re-calculated as notional rent (based on rental value) excluding the area where the new private facility is built.

You may wish to explore with the PCT if there are other ways to handle this, but it would be unwise to start the development without first reaching agreement on future reimbursement.

Lynne Abbess

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