ARRS Explained: Reimbursement, Employing PCN Staff and the Tax Consequences

The Additional Roles Reimbursement Scheme (ARRS) is widely misread as free money for extra staff. It is not. It is a reimbursement of defined employment costs up to a capped maximum, with real tax and VAT consequences for whoever does the employing. This guide takes the practical employer view: which roles are reimbursable, how the cap works, who can legally employ the staff, and how each model changes the payroll, the NHS pension, the Employment Allowance and (the expensive one) the VAT supply-of-staff position. It closes with how the reimbursement should sit in the accounts so it nets against the cost rather than inflating profit.

For where ARRS sits in the wider Network Contract DES, see our guide to PCN funding and the Network Contract DES. For how leadership pay to an individual doctor is taxed and pensioned (a different question from reimbursed staff), see PCN clinical director payments.

What ARRS Is, and the One Thing Practices Get Wrong

ARRS is a Network Contract DES funding stream that reimburses the employment cost of defined additional roles, introduced to expand the general-practice workforce. The core correction to make up front: it is a reimbursement up to a maximum, not a grant and not free money. The network must actually incur the cost (employ or engage the person and pay them) before it can claim, and anything above the per-role cap is the network's own cost.

The framing has three consequences you can budget from. The reimbursement is claimed monthly in arrears, so the network carries the salary, the employer National Insurance and the employer pension before any money arrives. The claim must match the payroll, so a claim built on an estimate has to be trued up. And the excess over the per-role maximum never arrives at all, so it belongs in the budget as a cost from the day the salary is agreed.

It sits inside the wider Network Contract DES alongside core PCN funding, enhanced access and the Investment and Impact Fund, but it behaves differently from those streams because it is tied directly to an employment cost the network has actually incurred. That tie is the whole point: the funding follows the staff, the staff have to exist and be paid first, and the claim has to match what was spent.

Which Roles Are Reimbursable

The recognised role families include clinical pharmacists and pharmacy technicians, first-contact physiotherapists, paramedics, social prescribing link workers, care coordinators, health and wellbeing coaches, mental-health practitioners, nursing associates, and others. The scheme has broadened over time, and the exact current list is set in the Network Contract DES guidance, so confirm it at source.

Three of those broadenings came in during 2025/26 and still hold for 2026/27: the previously separate GP ARRS pot was merged into the main ARRS, practice nurses were added, and the cap on the number of GPs who can be engaged was removed. They describe the current position, but they are not changes made for 2026/27. Confirm the current rules for the year you are reading in, because the role list and the per-role maxima are uplifted and revised each year.

The broadening of the scheme is not just a list-management detail; it changes the planning. Adding salaried GPs and practice nurses, and removing the cap on the number of GPs, means a network can now use ARRS funding for roles that look much more like core general-practice staff than the original additional roles did. That makes the employment-model and accounting questions more important, not less, because the sums involved are larger and the staff are more central to how the practices run. It also means the role list you worked from last year may not be the role list that applies this year, so confirm the current roles and maxima in the Network Contract DES guidance each time instead of carrying forward an assumption.

Reimbursement Up to a Maximum, Not Free Money

ARRS reimburses the actual salary plus defined employer on-costs (employer National Insurance and employer pension) up to a maximum per whole-time-equivalent for each role. If the post is paid above the cap, the excess is funded by the network from its own resources.

As an illustration only, the maximum reimbursable amount for a GP is £152,900 for 2026/27, or £155,698 with London weighting, and both figures already include the employer on-costs. Treat that as a snapshot for that year, not a fixed figure, and confirm the current amount at source.

There is also a cash-flow discipline. The network pays the staff first and then claims reimbursement, so there is a working-capital cost and a reconciliation requirement: the claim must match the actual cost incurred. A network that does not reconcile its claims to its payroll can find itself out of pocket or over-claimed, neither of which is comfortable.

Who Employs ARRS Staff (the Model Decides Everything That Follows)

This is the central question, because ARRS staff need a legal employer and the choice of employer drives the payroll, the pension, the Employment Allowance and the VAT. There is no single right answer; it is a tax, VAT, HR and risk decision per network.

Single Lead (Host) Practice Employs

One member practice is the legal employer and the staff work across the network. This is the simplest model to run, but recharging that staff resource to the other practices is the classic VAT trigger (see the VAT section below).

The PCN as a Separate Legal Entity

A federation, a company limited by guarantee, an LLP or a flat PCN company employs and deploys the staff. This concentrates the employment in one place, which can simplify HR, but it raises the supply-of-staff and Cost Sharing Group questions covered in the VAT section.

Joint or Shared Employment

All member practices are co-employers under one contract, or a concurrent-employment or shared-workforce model is used. NHS England guidance describes this as avoiding the supply-of-staff VAT problem, because there is no supply of staff between separate organisations and the salaries stay within PAYE, outside the scope of VAT. The trade-off is legal complexity and joint-and-several employment liability.

Direct Practice Employment and Other-Provider Models

The DES has, over successive years, broadened who may employ (a Core Network Practice, the PCN, or another provider with commissioner approval), so confirm the current-year position at source. Some roles are deployed in from a trust or a community pharmacy under a separate arrangement and are not employed by the network at all.

The point to hold on to is that the employer model is not an administrative afterthought. It is the decision that sets the VAT, pension and Employment Allowance outcome, and it is specialist territory.

A useful way to think about it is to follow one consequence through each model. Take VAT: in the single-lead-practice model the staff resource is recharged from the lead practice to the others, which is the classic supply-of-staff trigger; in the separate-entity model the entity supplies staff to its members, which raises the supply-of-staff and Cost Sharing Group questions; in the joint or concurrent model there is no supply between separate organisations, so the salary movement does not create a VAT supply at all. Now take the Employment Allowance: a GP practice that is the employer normally cannot claim it at all, because its activities are wholly or mainly of a public nature, while a separate PCN company or federation has to look at its own facts and may reach a different answer. And take the pension: scheme access can be straightforward where an NHS-pension-employing body is the employer and less so where a non-NHS entity is. The same staff, the same funding, but three quite different sets of consequences depending on who signs the employment contract. That is why the model is chosen first and the detail follows.

The Payroll, Pension and Employer-Cost View

PAYE and RTI. ARRS staff are employees of whoever employs them, run through PAYE under the usual real-time-information rules. For the underlying payroll operation (PAYE, RTI, auto-enrolment, NHS pension administration), see our guide to GP payroll services.

NHS pension. ARRS staff can generally access the NHS Pension Scheme where they are employed by an NHS-pension-employing body within the network, and the employer pension cost is one of the on-costs ARRS reimburses up to the cap. Scheme access depends on the employment model and the employing body, so confirm the position at source and do not assume universal access for every model, particularly where a non-NHS-body entity is the employer.

Employer National Insurance. The employer pays secondary Class 1 NIC at 15% on pay above the £5,000 secondary threshold (from 6 April 2025). This employer NIC on ARRS posts is itself part of the reimbursable on-costs up to the cap, so it should not be a net cost where the post is within the maximum.

The Employment Allowance Question

The Employment Allowance is £10,500 (2026/27), and the answer for a typical GP practice is no. The allowance is not available to an employer whose activities are wholly or mainly of a public nature, and HMRC's National Insurance Manual at NIM06530 lists among its examples of functions of a public nature "NHS services, general practitioner (GP) services where NHS patients take up the majority of a GP's work". The wholly-or-mainly test is 50% or more, so a practice whose private work is a minority, which describes almost every NHS practice, is caught. Gov.uk puts the same test in plain words on its eligibility page: you can claim if you do less than half your work in the public sector.

Two qualifications matter. A registered charity is not excluded even where its functions are of a public nature, so a charitable provider can still claim. And a separate PCN company or federation employing ARRS staff is fact-sensitive: its eligibility turns on what that entity itself does, which may not be wholly or mainly public, so it needs its own answer and its own advice. What none of this supports is a network budget that quietly assumes £10,500 of employer National Insurance relief at practice level. Take that assumption out before you price a post.

The VAT Trap on Shared ARRS Staff (the Expensive One)

When one entity (a lead practice, a federation or a PCN company) employs staff and then recharges or supplies them to other member practices for consideration, HMRC is likely to treat that as a standard-rated supply of staff at 20%, not exempt medical care. Because GP practices make mostly exempt and outside-the-scope supplies, that VAT is largely irrecoverable, so it is a real cost leak out of general practice.

The reason it bites so hard is the recoverability problem. A normal trading business that incurs VAT on a purchase can usually recover it, so VAT is broadly neutral for it. A GP practice cannot, because its income is mostly exempt medical care and outside-the-scope NHS funding, which gives it little or no right to recover input VAT. So if a lead entity adds 20% VAT to a staff recharge, the receiving practices generally cannot reclaim that 20%; it is simply an extra cost on top of the salaries. On a sizeable shared-staff bill across a network, that can amount to a substantial sum each year, taken straight out of money that was meant to fund patient-facing roles. That is why the supply-of-staff question is not a technicality to leave to the year-end; it is a live cost risk that should be settled when the employment model is chosen.

The Control Test

The distinction HMRC applies turns on control. If the employing entity merely provides personnel who then work under the direction and control of the recipient practices, that points to a taxable supply of staff. If the entity retains control and is itself delivering a healthcare service to the patient using its staff, that can be an exempt supply of medical care. NHS England has suggested ARRS services might be exempt regardless of structure, but that has not been formally agreed by HMRC, so reliance carries risk.

Why the £90,000 Threshold Matters

If the employing entity's taxable turnover, including the value of any taxable staff supply, exceeds £90,000 in a 12-month period, VAT registration becomes compulsory. Core NHS income and genuine exempt medical care do not count towards the threshold, but a taxable staff supply does. Our guide to GP VAT registration covers the threshold and the partial-exemption basics.

The Models That Reduce the Risk

Exposure can be reduced by structuring the arrangement differently. Joint or concurrent employment means there is no supply of staff between separate organisations, so no VAT on the salary movement. A properly constituted Cost Sharing Group (a separate entity supplying its members at cost, for their exempt activities, with no profit and no distortion of competition) can be VAT-exempt. Both are options that need specialist VAT advice and have strict conditions; neither is a guaranteed fix.

The On-Trust Misconception

Labelling fund movements as held "on trust" addresses the movement of money but does not by itself change the VAT liability of the underlying supply. That is a point on which specialist advice is needed, not a settled answer, so do not rely on it as a structuring solution without checking it properly.

The reason this catches networks out is that it confuses two different questions. Whether money is held on trust for the member practices speaks to who beneficially owns the funds; whether there is a taxable supply of staff speaks to what one organisation is providing to another for consideration. A trust arrangement can be perfectly sensible for governance and for keeping the network's money separate from a lead practice's own income, but it does not, on its own, answer the VAT question, because the VAT question turns on the nature of the underlying supply (staff under the recipient's control, or a healthcare service the supplier itself delivers), not on the label attached to the cash. So a network that has tidied up the ownership of the money should not assume it has also dealt with the VAT; the two need to be checked separately, and the VAT analysis is the specialist one.

What Does the ARRS Reimbursement Actually Cover?

The Network Contract DES specification for 2026/27 draws the boundary tightly. Your network claims 100% of the actual whole-time-equivalent salary for the role, including employer on-costs for National Insurance and pension. The claim is capped twice over: at the maximum amount for that role, and at your network's own Additional Roles Reimbursement Sum. Sections 10.5.1 and 10.5.2(a) put the on-cost limit in four words: National Insurance and pension only. Section 10.5.8 is a different limb, dealing with a person employed by a body that is not one of the network's core practices.

That makes the answer to the question practice managers keep asking a narrow one. Expenses paid to the employee are neither salary nor an employer on-cost. So mileage, a course fee, a DBS check or a professional subscription reimbursed to an ARRS post falls on whoever employs the person.

Indemnity costs sit in the same place. The Clinical Negligence Scheme for General Practice has covered NHS clinical negligence in English general practice since 1 April 2019. It does not reach non-clinical work, regulatory matters or privately funded work. Any gap you choose to fund is a cost of the post, not a claimable item.

The specification allows one costed exception for 2026/27. Where you sub-contract social prescribing instead of employing a link worker, your network may claim a contribution towards the provider's additional costs. That runs to £200 a month for each whole-time equivalent, caps at £2,400 a year, and sits inside the same maximum for the role.

The claim also leaves out two costs that are easy to miss. Network Contract DES payments are inclusive of VAT where VAT applies. A standard-rated staff recharge is therefore not funded on top of your reimbursement, and the 20% lands on the network. The second follows by inference from the same boundary instead of from any wording in the specification: where a federation acting as nominated payee charges an administration fee or commission for handling the money, that fee is neither salary nor an employer on-cost, so nothing in the reimbursable list covers it and the network carries it. Check what your nominated payee charges before you assume the reimbursement arrives whole.

The timing rule behind all of this shapes the cash flow under every model above. The commissioner pays monthly in arrears. Payment starts only once the employment has actually begun, or the service has commenced where a third party provides the role. You employ and pay first, then claim.

What an ARRS workforce claim covers, Network Contract DES specification for 2026/27 (1 April 2026 to 31 March 2027)

Cost	Inside the claim?	Where it falls if not
Actual salary, apportioned to network activity	Yes, up to the maximum for the role	Network, above the maximum
Employer National Insurance	Yes, inside the same maximum	Network, above the maximum
Employer NHS pension contribution	Yes, inside the same maximum	Network, above the maximum
Expenses reimbursed to the employee (mileage, course fees, DBS, subscriptions)	No	The employing organisation
Indemnity costs for work outside the state scheme	No	The employing organisation
Sub-contracted social prescribing provider costs	Yes, up to £200 a month per whole-time equivalent, inside the role maximum	The network, above that
VAT on a standard-rated staff recharge	No, payments are inclusive of VAT where it applies	The network, largely irrecoverable
Administration fee or commission charged by a nominated payee (inferred, not named in the specification)	No, it is neither salary nor an employer on-cost	The network

What Changed for 2026/27, and Who Employs the GP?

NHS England made two changes for 2026/27 that move where a GP's funding sits. The first is a new practice-level GP reimbursement scheme. It is paid for by repurposing £292 million from the network-level Capacity and Access Payment. You use it to recruit additional GPs, or to fund extra sessions from GPs already in the practice.

The Capacity and Access Support Payment and the Capacity and Access Improvement Payment leave the Network Contract DES funding envelope at the same time. The consequence for you as an employer is the part the contract documents leave unsaid. Money that used to reach a GP through the network now reaches the practice.

For those sessions the practice is the employer. The practice runs the payroll and holds the pension liability, and it should not budget for the Employment Allowance, which a typical NHS practice cannot claim. If your network built its GP capacity on Capacity and Access money across several sites, the contracts and the payroll need to catch up with the funding route early in the year.

The second change is to ARRS itself. NHS England removed the restriction limiting ARRS funding to recently qualified GPs. It also raised the maximum reimbursement for a GP to the top of the salaried GP pay range plus employment on-costs, and let networks recruit a broader range of roles where the commissioner agrees. The GP reimbursement scheme 26/27 and the ARRS change run in parallel, so decide deliberately which route funds which post.

Additionality still governs whether you can claim at all. A GP substantively employed by any core network practice in the previous 12 months cannot be moved into ARRS. That stops practice-funded posts being re-labelled as network posts.

Check a candidate against the carve-outs before you assume the restriction bites. A GP transferring from a post previously funded through the Capacity and Access Payment or the PCN Test Site programme is outside the restriction. Temporary cover for maternity or sickness leave does not count as substantive employment either.

What Happens When the Cost Goes Above the Reimbursement Cap?

Price the post before you sign it. The salary you agreed is not the cost you carry, because the two employer on-costs inside the claim are real money. Secondary Class 1 National Insurance runs at 15% on pay above the £5,000 secondary threshold for 2026/27.

The NHS Pension Scheme employer contribution needs care, because the headline number is not what you pay. The total credited on the member's behalf is 23.7% of pensionable pay, applicable since 1 April 2024 and still holding for 2026/27, with a re-set due from 1 April 2027. But NHS Employers states that "Employers are responsible for paying 14.38 per cent of contributions, the remaining 9.4 per cent is funded centrally", and the Network Contract DES footnotes to sections 10.5.1 and 10.5.2 say the same thing from the reimbursement side: "This does not include the additional 9.4% per cent employer contributions". So the pension line in your own cost model is 14.38%, not 23.7%. Using 23.7% overstates the cost of a £50,000 post by about £4,660 a year. Watch the two calendars as well: the scheme's rates turn on 1 April, while the tax year turns on 6 April.

The maxima are set against Agenda for Change bands, with higher inner and outer London rates where your core network practices sit in the London region. Anything the post costs above the reimbursement cap is funded by nobody else. In a partnership it comes out of the partners' profit share.

Take a network employing one first-contact physiotherapist, on round illustrative figures and not the published maxima. Say the salary is £50,000 for 2026/27 and the maximum reimbursable amount for the role is £60,000. Employer National Insurance at 15% on the £45,000 above the secondary threshold is £6,750. The employer pension contribution at the 14.38% the employer actually bears is £7,190.

Total employer cost is £50,000 plus £6,750 plus £7,190, which is £63,940. Set against a £60,000 maximum, that leaves £3,940 the member practices fund out of their own profit. Change the salary or the role and the gap moves, so read the real maximum from the role maxima table in the specification for the relevant year before you budget. Note what happens if you take the headline 23.7% instead: the pension line becomes £11,850, the total becomes £68,600 and the gap looks like £8,600, more than double the real one. That single error is enough to make a viable post look unaffordable.

Do not expect the Employment Allowance to close that £3,940. The 2026/27 limit is £10,500, but a typical NHS GP practice cannot claim it at all, for the reasons set out in the section above, so the gap is funded out of profit share. Whether any entity in your network can claim turns on which entity employs the staff, and for a separate PCN company or federation that is a question to answer on its own facts.

How the Reimbursement Should Sit in the Accounts

ARRS income should be recognised against the matching staff cost so it largely nets off. Any above-cap excess, such as the £3,940 above, is a net cost to the network. Booking the income as profit with the cost hidden elsewhere overstates profit and distorts the partners' tax, since a partner is taxed on profit share, not drawings (our GP partnership tax complete guide explains how that flows through). Our GP accounting guide and GP bookkeeping guide cover the posting, and our guide to the complete list of GP tax deductions covers staff costs and employer NIC as practice expenses.

Almost every expensive ARRS mistake is settled before a single claim is submitted, at the moment the network decides who signs the employment contract and what the post is going to be paid. Both decisions are cheap to get right in advance and painful to unwind afterwards, because the VAT position on shared staff, access to the NHS pension and the size of the above-cap gap all follow from them. If your network is picking an employer model, pricing a post against the role maximum, or trying to work out whether a staff recharge has quietly created a 20% supply, that is a conversation worth having before the contract is signed: get in touch.