Enhanced and Locally Commissioned Services: Extra GP Practice Income and How It Is Taxed

Beyond the core Global Sum and QOF, a GP practice can earn a long tail of extra income from enhanced services. These split into two families: nationally directed schemes (DES) that a practice can opt into, and locally commissioned services (LES, sometimes called locally commissioned or local enhanced services) that vary by area and Integrated Care Board. They are optional, they sit on top of the core funding, and they can add up to a meaningful slice of practice income.

This guide explains what these streams are, who commissions them and how a practice decides whether a service is worth signing up to. It then covers the part many summaries skip: how this income is taxed as ordinary practice trading profit, and where the VAT line falls (most enhanced work is NHS care and outside scope, but some clinic-style work can be standard-rated). The aim is a partner who can look at a list of enhanced-service offers and understand the income, the tax and the decision. Enhanced services sit on top of the core funding explained in how GMS funding works, and they are not the same as QOF, as we set out below.

Where enhanced services sit in GP funding

The clearest way to place enhanced services is against the rest of the income picture. The Global Sum (the core per-weighted-patient payment, explained in how GMS funding works) and QOF (the quality framework, explained in QOF income explained) are the core lines. Enhanced services are additional, optional income on top of those, commissioned separately rather than baked into the core contract.

Importantly, this is still practice trading income like the rest. It belongs to the partnership, feeds the practice's profit and is taxed on each partner's profit share, exactly as covered in our GP partnership tax complete guide. The fact that it is optional and separately commissioned changes how it is earned, not its fundamental tax character.

The reason this stream matters out of proportion to its size is that it is the part of practice income the partners can most directly influence. The core Global Sum moves largely with the list and the annual uplift, and QOF rewards quality the practice was largely going to pursue anyway. Enhanced services, by contrast, are genuine choices: the practice decides which to take on, can build a service around its team's skills, and can grow or drop a service as capacity allows. That makes enhanced services a real lever in GP practice management, but only if the practice prices each one properly and tracks whether it is actually contributing to profit rather than quietly absorbing staff time.

Directed Enhanced Services (DES)

What a DES is

A Directed Enhanced Service is a nationally agreed and directed service that commissioners must offer to all practices in England. The funding and specification are set nationally, so a DES looks broadly the same wherever it is offered. The practice itself chooses whether to sign up: being offered a DES does not oblige a practice to deliver it.

Examples

It helps to have concrete examples, but they must be read as a snapshot rather than a fixed list. DES examples have included childhood and seasonal vaccination and immunisation programmes, the Network Contract DES delivered through primary care networks, and other nationally directed schemes. Treat these as examples only: the DES roster changes year to year as schemes are added, amended or retired, so a practice should always work from the current national specifications rather than assume a particular service is still running on the same terms.

Because a DES is nationally specified, the practice broadly knows what it is signing up to: the service requirements and the funding are set out centrally, so the variation between practices is mostly in how efficiently each delivers the service rather than in the deal itself. That is helpful for planning, because the practice can model the income and the delivery cost against a known specification. The flip side is that the practice has little room to negotiate the terms; the decision is essentially whether to take the nationally set deal or not, given its own capacity and cost base.

The Network Contract DES (named once)

One DES is worth naming specifically. The Network Contract DES is the directed enhanced service that funds primary care networks and the additional roles within them. It is a substantial and distinct topic in its own right, covering how networks are funded and staffed. We mention it here only as one example of a DES; the detailed treatment of primary care networks sits in dedicated material rather than in this guide on enhanced-services income and tax.

Local Enhanced Services / Locally Commissioned Services (LES / LCS)

What a LES is

A Local Enhanced Service (also called a locally commissioned service) is a service a local commissioner develops to supplement the core contract. The commissioner is the Integrated Care Board (ICB), often acting after consulting the Local Medical Committee (LMC). Because a LES is local rather than nationally agreed, its scope and funding vary across the country: a service offered in one area may not exist, or may be paid differently, in another. As with a DES, the practice chooses whether to sign up.

Examples

Typical LES examples include minor surgery, contraceptive and coil or implant fittings, phlebotomy, near-patient testing, ambulatory blood-pressure monitoring, some mental-health and substance-misuse work, and wound care. These are typical examples and are locally variable: there is no national fixed LES list, so a practice should look at what its own ICB actually commissions. Some of these services exist in one area and not another, and the same service can be specified and priced quite differently between commissioners.

How a LES is priced and paid

A LES is locally negotiated. Payment is often per item (for example per minor-surgery procedure or per fitting), sometimes per patient, and sometimes as a block payment for providing the service to the local population. The commissioner pays the fee. The practical planning point is that the practice should model whether the fee covers the staff time and overhead of delivering the service, because a poorly priced LES can cost more to deliver than it pays. That decision lens is set out later in this guide.

The payment basis changes the risk the practice carries. A per-item fee tracks activity, so the practice is paid for what it actually does, but it also means the income is only worthwhile if the volume is there; a service that is offered but rarely used earns little while still tying up training and equipment. A block payment gives certainty of income but puts the volume risk on the practice, because the fee is fixed whether ten or a hundred patients come forward. Neither basis is better in the abstract; the practice has to match the basis to its expected demand and its appetite for risk. A well-judged LES decision is partly a clinical one and partly a straightforward piece of costing.

DES versus LES versus QOF versus core (a clear comparison)

Because these streams are easy to conflate, here is a tight comparison:

• Core Global Sum. Per weighted patient, automatic for the practice's registered list, the foundation of practice funding. See how GMS funding works.
• QOF. Quality points, opt-in, paid for measured quality of care rather than for delivering a specific extra service. See QOF income explained.
• DES. Nationally directed, must be offered to every practice, opt-in, funding set nationally.
• LES. Locally commissioned by the ICB, opt-in, scope and funding variable by area.

The headline distinction to keep clear is that QOF rewards quality, while enhanced services pay for delivering specific additional services. They are not the same thing, and they should be recorded as separate lines in the accounts.

Keeping the four streams separate in the accounts is not pedantry; it changes what the partners can see and decide. If the core funding, QOF and the various enhanced services are all collapsed into a single income figure, the practice cannot tell which parts of its income are secure, which are quality-linked and which are discretionary services it could grow or drop. Broken out, the picture becomes actionable: the partners can see that the core funding is stable, that QOF is tracking expectation, and that a particular LES is or is not pulling its weight. That visibility is the whole reason to treat enhanced services as a distinct line rather than folding them into a general NHS-income total, and it is the foundation for the sign-up decisions discussed below.

One more clarification avoids a common muddle. The Network Contract DES sits in the DES column above, but because it funds primary care networks and the roles within them, its money does not flow to a practice in the same way as a simple practice-level DES or LES. We name it as a DES for completeness, but the detail of network funding is a separate subject and is not the focus of this guide on practice-level enhanced-service income and its tax.

How enhanced-services income is taxed

Enhanced-services income is ordinary practice trading income. It is part of the partnership's taxable trading profit, allocated to partners under the profit-sharing agreement and taxed on each partner's profit share, with Class 4 National Insurance, through the partnership return (SA800) and the partnership pages (SA104). The full mechanics of that flow are in our GP partnership tax complete guide.

There is no separate tax regime for enhanced services. It is taxed as profit when earned. The flip side is that the costs of delivering the service (the staff time, the consumables, the equipment) are deductible against that income in the usual way, which is part of why the marginal cost matters so much to the sign-up decision. We do not re-teach the deductions list here; for the full picture see our complete list of GP tax deductions.

Because the income and its costs both run through the partnership's trading profit, the practice is effectively taxed on the net contribution of each service, not the gross fee. A LES that pays a healthy fee but consumes most of it in staff time and consumables adds little to taxable profit and little to the partners' take-home; a leaner service with low delivery costs contributes more even at a smaller headline fee. This is why the costing exercise and the tax outcome point the same way: a service that is marginal on a cost basis is also marginal on an after-tax basis, and one that covers its costs comfortably is the one that actually moves the partners' income. The deductibility of the delivery costs is helpful, but it does not rescue a service that is underpriced relative to the effort it takes.

Timing and accruals

Where a service is delivered in one accounting period but paid in the next, the income should be accrued like any other practice income, so the profit reflects what was earned in the period rather than when the cash happened to arrive. This keeps the partners' profit share accurate, especially for block or end-loaded payments. The broader accounts that house this are covered in our GP accounting guide.

The VAT line on enhanced and private-feeling services

VAT is where enhanced services can occasionally surprise a practice. The general position is reassuring: most enhanced services are NHS-commissioned medical care, so they are exempt or outside the scope of VAT, and that income does not count towards the VAT registration threshold. For the great majority of enhanced work, there is simply no VAT to worry about.

The watch-item is work whose primary purpose is not the protection, maintenance or restoration of health. Where a practice picks up work alongside its NHS services that is, for example, purely cosmetic, or administrative, or a third-party report with no care element, that work can be standard-rated even though a doctor provides it. This is the principal-purpose test, and it is the same line that runs through all medical VAT. It is a watch-item, not a reason to over-claim a VAT problem, and the detailed position is in our guide to GP VAT registration.

For the great majority of practices, the enhanced services they deliver are squarely on the exempt side of the line, because they are genuine NHS-commissioned medical care. The reason to keep the test in mind at all is that practices often pick up small amounts of clearly different work, and it is the standard-rated work, not the enhanced services, that can create a problem. A practice that earns a growing stream of non-therapeutic income (some private cosmetic clinic work, regular medico-legal reporting, or third-party medicals) needs to watch its taxable turnover, because once taxable (non-exempt) turnover crosses the registration threshold the practice must register for VAT, even though its NHS income is outside scope and does not count towards that threshold.

The practical point is one of bookkeeping discipline rather than alarm. The practice should be able to identify, separately, any income that is standard-rated, so that it can monitor the taxable total and know well in advance if registration is approaching. Lumping all income together and assuming "it's all medical so it's all exempt" is precisely how a practice drifts over the threshold without noticing. Where there is genuine doubt about which side of the line a particular piece of work falls, it is worth getting a view before the volume builds, rather than after.

Should the practice sign up? (a decision lens, not advice)

Whether to take on a given enhanced service is a practice decision, not a tax rule, but a neutral framework helps. Work through:

• Does the fee cover the marginal cost? Staff time, consumables, room use and any indemnity for private elements all have to be covered before the service contributes to profit.
• Does it fit the practice's capacity? A service that displaces core work or stretches the team can cost more than it earns, even at a fair fee.
• Is there a set-up cost? Equipment, training or accreditation needs to be recovered before the service is genuinely profitable.
• Is it pensionable? NHS-commissioned work feeding the partnership's profit is pensionable for a Type 1 partner; income taken through a company is not NHS-pensionable, because a company cannot hold the NHS contract.

The point is to judge whether the service earns its keep, not simply whether it is on offer. For help modelling the cash flow and the reserve around these decisions, see our GP financial planning guide; the pension angle is covered in GP pension contributions and tax relief.

It is worth stressing that the marginal-cost test is about the real cost of delivery, not just the obvious one. A minor-surgery LES, for example, is not only the clinician's time: it is the nurse or healthcare assistant assisting, the consumables, the sterilisation, the room that could have been used for something else, and the administrative time booking and recalling patients. A service can look profitable on the headline fee and the clinician's time alone, yet barely break even once the full delivery cost is in view. The discipline is to cost the service properly before signing up, and then to revisit it periodically, because a service that made sense at one fee or one volume can stop making sense when either changes.

There is also a capacity and continuity point that sits alongside the pure economics. A service the practice cannot reliably staff (because it depends on one clinician's particular skill, or because demand is unpredictable) carries a hidden risk: the practice commits to a specification it may struggle to meet, which can damage its relationship with the commissioner and its patients even where the fee is fair. Conversely, a service that uses the team's existing skills and slots neatly into the working day can be worth taking on even at a modest fee, because the marginal cost is genuinely low. The decision is rarely about the fee in isolation; it is about the fee set against the practice's real cost, capacity and risk.

How we help GP practices

Our enhanced-services work with practices is mostly about clarity and decisions. We help practices see each enhanced-service line clearly in the accounts, separate from the core Global Sum and QOF, so the partners can tell which services actually contribute to profit. We model whether a proposed DES or LES fee covers the marginal cost of delivering it, flag where a piece of work might cross the VAT line into standard-rated territory, and make sure the income is accrued correctly where delivery and payment fall in different periods. The aim is a practice that takes on the enhanced services that earn their keep and prices the rest with its eyes open. This is general information rather than advice for your circumstances, and because both the national DES menu and local LES arrangements change, the current specifications are always the figures to check. If you would like help working out which services are worth your practice's time, you are welcome to get in touch.