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How to cope with the retirement of a GP partner

Katharine Mellor considers what the practice needs to do when a partner decides to retire.

When a partner retires, the practice’s assets must be valued and transferred to the continuing partners (Photograph: Istock)
When a partner retires, the practice’s assets must be valued and transferred to the continuing partners (Photograph: Istock)

When a GP principal decides to retire, putting the necessary arrangements in place can take time. Practices should ensure that they plan ahead adequately, so that they can continue to care efficiently for patients.

If there is a partnership agreement in place, this should set out the terms under which a partner may leave.

If there is no partnership agreement, it will be necessary to negotiate retirement terms and set these out in a deed of retirement. Failure to do so could result in the partnership being dissolved when the partner retires and the practice's contract being jeopardised.

Solo GPs
For the practice to continue, the GP needs to recruit a partner or partners to take over the contract, with a period of overlap for handover and completing other arrangements.

If a solo GP intends to retire and close the practice, they must give notice to their primary care organisation (PCO). Not all APMS contracts allow the contractor to terminate the contract mid-term, however.

New partners
If a new partner is needed to take over the duties of a retiring partner, it will take time to recruit the right person. Practices should consider whether any specific contractual terms should apply to the new partner, such as a probationary period, contributions to partnership capital and profit-sharing arrangements.

Practice continuation
The practice contract must be transferred to the continuing partner(s). A GMS contract can be transferred between eligible partners, provided that the requirements for giving notice stipulated in the relevant regulations are followed.

With a PMS contract, PCO consent is required to vary it when there is a partnership change. Consent is usually given, but PCOs have discretion to refuse and may occasionally do so. If the practice has an APMS contract, requirements will be similar to those for PMS.

Partnership assets
The practice's assets must be valued and transferred to the continuing partners.

Non-premises assets will usually be transferred at the written-down (depreciated) book value in the last set of accounts, adjusted to the leaving date. The practice's accountant can advise on this.

Any dispute may need to be referred to an independent arbitrator and a mechanism for this should be included in the partnership agreement.

If a singlehanded GP takes on a new partner before retirement, arrangements for the practice assets should be agreed in advance.

Where one or more partners own the premises, they should already have agreed whether these are to be treated as a partnership asset and whether a retiring partner is permitted to retain their interest in the premises or must sell up to the other partners. It is important to seek financial advice because tax considerations will need to be taken into account.

If the retiring partner retains their stake in the premises, the continuing partners should agree a lease with their former partner landlord to document the terms of this arrangement.

If the retiring partner intends to sell their interest to the continuing partners, the value needs to be agreed. The partnership agreement (or a separate deed of trust) should state valuation principles to be used. If there is no agreement in place, the partners will have to negotiate and agree a value and process for transferring the premises.

For practices already in leased premises where the retiring partner is a party to the lease, the lease provisions should be checked and arrangements made to assign it to the continuing partners and to release the retiring partner from their obligations.

Five top tips

1. Be prepared. Ensure the partnership agreement adequately deals with what happens when a partner retires.

2. Ensure there is sufficient time before the partner leaves to hand over all procedures, workload and other relevant matters.

3. Comply with the relevant terms of the practice contract dealing with partners retiring and ensure all processes are followed.

4. Notify all employees, patients, suppliers, the primary care organisation and other authorities with which the practice is registered.

5. Deal with premises and other assets owned by the partners, ensuring these are valued according to the partnership deed, or where there is none, by an independent third party.

The partnership agreement should set out arrangements for determining sums due to or from the retiring partner from profits not paid out in drawings, capital and loans to the partnership. It may take months to finalise the accounts, but the partnership agreement may allow for payments on account.

Compulsory retirement
A factor that partnerships will need to consider is whether to include a compulsory retirement age in the partnership agreement.

The Supreme Court recently held in the case of Seldon v Clarkson Wright and Jakes that a law firm had legitimate aims - staff retention, workforce planning and the need to avoid expulsion of (older) partners due to performance management issues - that could justify requiring a partner to retire at 65.

Such aims can be legitimate, but a partnership must demonstrate appropriate means of achieving them. This will be decided case by case. A court or tribunal will consider whether the aims are proportionate in general and in their application to a particular partner.

This is a complicated area of law and GP partnerships should seek advice on including/retaining a compulsory retirement age in partnership agreements.

Notices and stationery
When a partner retires, practices should notify patients, regular suppliers and the various authorities with whom the practice is registered, such as HM Revenue & Customs, the Information Commissioner and, from April 2013, the Care Quality Commission.

Practices may also want to place a notice in the local newspaper and the London Gazette (www.london-gazette.co.uk). The practice website and stationery will also need updating.

  • Katharine Mellor is corporate partner and head of healthcare at solicitors DWF LLP, www.dwf.co.uk

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