Practice refurbishment finance for private clinics

A clinic refit is judged against infection prevention, privacy and access standards that an ordinary commercial fit-out never meets. The NHS England design guidance on flooring, walls, ceilings and sanitary ware (HBN 00-10) is written for NHS buildings but is widely used as the benchmark for private clinics too. In practice that means:

• Welded sheet flooring coved up the walls, and cleanable wall finishes in treatment and procedure rooms.
• Clinical hand-wash basins with the right taps and splashbacks, and separate cleaning and dirty utility space.
• Mechanical ventilation for procedure rooms, laser rooms and any decontamination area.
• Acoustic separation between treatment rooms so consultations stay private.
• Step-free access, accessible toilets and door widths for wheelchairs and couches.
• Secure storage for medicines, clinical waste and patient records.

These items are what drive cost overruns. A contractor who normally fits out shops may price the job lower and then meet the standards late, so lenders favour quotes from firms with healthcare experience.

Medical care provided by registered health professionals is generally exempt from VAT, as HMRC's guidance on health professionals and VAT (Notice 701/57) explains. A clinic making only exempt supplies cannot reclaim the VAT charged by its builder, so a quote that looks affordable before VAT becomes a fifth higher in cash terms. Clinics that also make taxable supplies, such as purely cosmetic aesthetic treatments or retail products, may be able to recover part of the VAT under partial exemption. Ask your accountant for the recoverable proportion before you set the loan amount, and borrow against the gross figure where VAT is a real cost.

Most practices cannot afford to close. Phasing the job room by room, working evenings and weekends, or moving some clinicians to temporary rooms keeps income coming in but adds to the contractor's price and stretches the programme. Build the lost appointments into your cash flow forecast and consider a small standby facility so that a delay does not force you to cut clinical hours or delay paying staff. Our page on healthcare practice working capital covers facilities that suit this.

Illustration only, with round hypothetical figures and no rates. A private musculoskeletal and podiatry clinic is turning away bookings and plans to convert an unused storage area into two treatment rooms and a small procedure room. The budget is £150,000 including VAT, which the clinic cannot recover.

• £35,000 of equipment, including a nail surgery chair, autoclave and two couches, goes on hire purchase.
• £100,000 of building work, ventilation and fees is funded with a five-year unsecured term loan, supported by the clinic's two years of accounts and a waiting list showing demand.
• The clinic keeps £15,000 of its own cash as a contingency rather than borrowing it, and its landlord consents to the alterations with a five-year lease extension.

Separating the equipment keeps the unsecured loan smaller, and the lease extension means the term loan ends well before the lease does.

Some elements of a refit, such as certain plant, fixtures and integral features, may qualify for capital allowances, which reduce taxable profit; the general rules are set out in HMRC's guidance on claiming capital allowances. Tax relief does not make an unnecessary project worthwhile, though. Unsecured borrowing for fit-out usually needs personal guarantees, and a refit in premises with a short lease may leave you repaying for improvements you then have to remove. If the clinic's cash flow is already tight, a smaller first phase paid from reserves, or a landlord contribution in return for a longer lease, may be better than borrowing the full sum. If you are opening new premises rather than refitting existing ones, see clinic start-up finance.