The (re)-birth of wholly-owned subsidiaries in the NHS

With NHS providers being told to pass support functions to wholly-owned subsidiaries (WOS) companies, many are circling around the pros, cons, rules and processes applicable to WOS. A good starting point is NHS England (NHSE) guidance on the formation of WOS. This was first published in 2018 and was updated in February 2024 to introduce a so called more flexible system for assessing a Trust’s plans to establish a WOS.

Our experience is that trusts have increasingly looked at innovative ways of managing financial and operational delivery and many have and are exploring WOS to do this. However, with recent articles in the Health Service Journal [£] stating that Trusts have been told by Sir Jim Mackey, NHSE’s transition CEO, to create WOS to support service and corporate services spend, interest will inevitably grow!

In this blog, we provide high level summary of WOS for those NHS providers considering it.   

1. The creation of (or interest in) subsidiaries are permitted under the NHS Act 2006 (and have been for some time).

2. Subsidiaries in the NHS context is far broader than in the ordinary corporate world. Guidance from NHSE refers to them as a separate, distinct legal entity for the purposes of taxation, regulation and liability that is owned or partly owned by a provider. It covers all types of companies (companies limited by shares, guarantee, Community Interest Companies etc.) but also joint ventures. 
3. The rules are different for Foundation Trusts (FTs) and Trusts, with the latter having more limited powers in the sense that any subsidiary they have an interest in can only be for the purposes of creating additional income from non-NHS services. That differs to FTs. They have broader rights to create subsidiaries (or have an interest in them). They can do so for purposes of, or in connection with, the exercise of their functions (i.e. for core NHS healthcare provision purposes) but they may also form subsidiaries or have an interest in them for income generation purposes.
4. The 2024 guidance sets out the reporting thresholds – the size of assets or income and the number of staff. Only one of these thresholds needs to be triggered for the proposal to be reported to NHSE (we anticipate that this role will be manged by the DHSC) who will then approve or reject.
5. Depending on the complexity of the proposed subsidiary, one of two processes are followed. Either a lighter touch desktop review is carried out in cases where NHSE describe the risk as “material” or a more detailed review in cases they describe the risk as “significant”. As part of the process NHSE will RAG rate it before categorising into one of the two risk categories. If it is rated green or amber, it generally proceeds with minimal oversight whereas if its classified as red then they take a far more active role.

We have been involved in the creation of various WOS within the NHS and our team are experienced in supporting Trusts through the NHSE approval process – do contact Rob Day to discuss how we can help. 

Our content explained