Incorporating a GP practice: novation and sub-contracting

Most GP practices are partnerships, which means the partners are personally liable for the practice’s debts and the GMS contract depends on the partnership continuing. Moving the practice into a limited company can deal with both, and may help with tax, although the tax side is a question for your accountant and not for me.

I advise practices in England on whether incorporation is worth doing and then do the legal work. There are three ways of going about it, and for many practices the best approach is to sub-contract to a company first and novate the contract later, as I explain below.

Novating the GMS contract to a company

The first route is to set up a company and move the GMS contract to it, so that the company becomes the contractor. The practice’s assets and staff move across, and the partners become its directors and shareholders.

This needs the commissioner’s agreement. For most practices that means the ICB, which commissions GP services on behalf of NHS England. (The Health Bill, which is in the House of Lords as I write, would abolish NHS England and leave commissioning with ICBs directly, but it isn’t law yet.) The company also has to be one that is allowed to hold a GMS contract. Under section 86 of the National Health Service Act 2006 it must be a company limited by shares, at least one share must be legally and beneficially owned by a medical practitioner, and every other share must be owned by someone within the categories that section lists. That restricts who can be a shareholder, and it has to be checked before anyone designs a share structure.

Novation is the tidier result but it takes time, as it isn’t unusual for the commissioner to take many months, and it may attach conditions.

Sub-contracting to a company

The second route leaves the GMS contract with the partnership. The partners set up a company, and the partnership sub-contracts the delivery of services to it.

Commissioner consent is not required for this, but notice is, and the commissioner has a right to object. The rules are in paragraph 44 of Schedule 3 to the National Health Service (General Medical Services Contracts) Regulations 2015. As they stood when I updated this page in October 2026, a contractor that wants to sub-contract clinical matters must:

• take reasonable steps to satisfy itself that sub-contracting is reasonable in all the circumstances, and that the sub-contractor is qualified and competent to provide the service; and
• give written notice of its intention as soon as reasonably practicable before the sub-contract is due to start, stating who the sub-contractor is, how long the sub-contract will last, which services it covers and which premises will be used.

The commissioner can ask for more information. It then has 28 days from receiving the notice to object in writing, on the grounds that the sub-contract would put patient safety at serious risk or put the commissioner at risk of material financial loss. If it objects, the practice can’t go ahead, or has to end the sub-contract if it has already started.

Paragraph 44 also contains a restriction which matters a great deal here. Essential services can’t be sub-contracted to a company owned or set up by the partners if that company was formed, wholly or partly, to get round the ban on selling the goodwill of a medical practice in section 259 of the National Health Service Act 2006. The reason for the structure has to be a proper one, and the documents should show it.

So although this route doesn’t involve asking for permission, the notice needs to be complete and the timing needs to be planned. PMS agreements have their own regulations and wording, so for a PMS practice I work from the agreement itself.

Doing both

As novation can take so long, my usual recommendation is to put the sub-contract in place first, so that the practice is operating through the company, and to apply for novation alongside it. It costs more than either route alone, but it means the practice gets the company structure in place without waiting for the commissioner.

Which route suits your practice

It depends on the number of partners and how long each intends to stay, who owns the premises, how your ICB has dealt with other practices, and most of all the figures. Your accountant has to model the tax position before anyone commits, and I work with them so that the legal structure matches what the figures assume.

It’s easy to overlook the NHS Pension Scheme, as how the partners’ and staff’s pensionable income is treated after incorporation needs specialist accountancy or pensions advice, and it’s often what decides the question. The same goes for the CQC, as a company carrying on regulated activities needs its own registration, which is an application for the practice to make. I don’t do that for you, but I plan the timetable around it.

Sometimes the answer is that incorporation isn’t worth it for your practice, and a better partnership agreement would deal with most of what’s worrying you.

What the legal work involves

The partners need a company with articles written for a GP practice, and a shareholders’ agreement doing the job the partnership deed used to do, which covers who can hold shares, what happens on retirement and how decisions are made. (Your accountant or a formation agent registers the company itself; I write its constitution.)

The business then has to be transferred to the company, usually under an asset purchase agreement between the partnership and the company, which has to be drafted with the goodwill rules firmly in mind. Staff transfer under TUPE, so there’s an information and consultation process to run first, and supplier contracts and equipment leases have to be moved over.

On the NHS side there is the sub-contract and the notice, or the novation application and the deed of novation, or both. If the partnership owns or leases the surgery, a property colleague at Nexa deals with any lease or transfer, and that is quoted separately. It’s the kind of reorganisation I also do for other businesses, described on my restructuring page.

How long it takes and what it costs

The sub-contracting route can be documented in a few weeks, and then you need to allow for the notice and the 28-day objection period before relying on it. Novation runs to the commissioner’s timetable, which usually means months.

The fee is fixed and agreed in writing before I start. As a guide, incorporation projects cost between £6,000 and £15,000 plus VAT, depending on the route (doing both costs more), the number of partners and how much there is to transfer.

Next steps

If you’re considering incorporation, get in touch and let me know the number of partners, whether you hold a GMS or PMS contract, who owns the premises, and what your accountant has said so far. I’ll tell you which route I’d look at and what it would cost.