Diagnostic hubs raise tax and regulatory issues for landlords

Earlier this week, the government outlined plans to establish 19 new diagnostic hubs across England in response to a growing backlog in the delivery of healthcare services linked to the Covid-19 pandemic.

The Department of Health and Social Care has said 91 such diagnostic centres are already operational and have delivered more than 2.4 million tests, checks and scans since July 2021. 

Louise Fullwood and Andrew McCarthy of Pinsent Masons said the move to localise the delivery of healthcare to address backlogs is an innovative step that reflects a continuation of a trend seen during the Covid-19 pandemic when community centres, unused shops, religious centres and sports stadia, among other non-healthcare real estate, were used as testing centres and for delivering vaccinations.

While Fullwood said the move should make access to healthcare simpler from a logistical perspective and help put healthcare at the heart of communities, she said there are legal issues to navigate when real estate assets are repurposed as healthcare facilities.

McCarthy said: “For the NHS to be able to reclaim VAT, the provision of the property cannot just be under a normal premises lease but rather under a supply of a ‘managed healthcare facility’ arrangement. This in turn can lead commercial landlords to be concerned about compliance burdens arising from relevant regulations around provision of healthcare adjacent services.”

Fullwood said: “Landlords should seek specialist VAT, healthcare regulatory and property law advice to work through these issues.”