NHS income is the anchor that makes many practice purchases fundable: contracted, predictable, bankable. But the contract carries an obligation — deliver the UDAs — and under-delivery is repaid through clawback. When you buy the practice, you buy that delivery obligation too, and the most expensive version of it is the one that never appears in the accounts you were shown.
Year-end reconciliation puts every contract into one of four positions, and only one of them involves money coming back:
Reconciliation happens annually, by the September following the end of the financial year. That timing matters more than buyers expect: complete a purchase in, say, March and you may own the practice for six months before the commissioner confirms what the outgoing year actually produced.
The 96%-to-100% band is where buyers get hurt, because nothing bad appears to have happened. No money was recovered. No breach notice was issued. The profit and loss account shows the contract paid in full. What happened instead is that the undelivered activity rolled forward — and carried-forward activity must be completed before a single UDA counts towards the new year's target.
Put figures on it. Consider a contract of 12,000 UDAs with a contract value of £360,000 — a UDA value of £30.00. The practice delivers 97% each year:
Miss it, and you fall below 96% in year one. On this contract that is a shortfall of 720 UDAs against target, worth £21,600 recovered by the commissioner, plus the breach notice that comes with it. The seller's accounts, meanwhile, were entirely accurate: three years of a fully paid contract with no clawback line anywhere.
The April 2026 contract reforms added an obligation that no historical account you are shown will reflect. Contractors with mandatory services contracts of 100 UDAs or more must now direct 8.2% of their Relevant Contract Value to urgent care, expressed as 11 urgent courses of treatment for every £10,000 of contract value, rounded up.
On the £360,000 contract above, that is 36 lots of £10,000, so 396 urgent courses of treatment a year — sessions that must be held open for unscheduled patients rather than filled with planned restorative work. Payment for those contractors is structured as a £15 fixed payment plus a £60 activity payment within the requirement, rising to £75 for courses delivered above it; contractors not required to prioritise urgent care receive a £75 activity payment. Practices whose diaries are built entirely around booked courses of treatment have real reconfiguration to do, and there is a mid-year checkpoint: failing to deliver 30% of the required urgent treatments by the halfway mark triggers commissioner action rather than a quiet conversation in September.
For a buyer, the practical consequence is that 2025/26 delivery history no longer describes the job you are taking on. Ask specifically how the practice has restructured its diary since April 2026, and what its urgent care delivery looks like against the 396-course requirement so far this year.
Delivery concentration is the other number that decides whether a contract is an asset or a problem. If a large share of activity sits with the departing principal, you are not replacing a dentist — you are replacing the contract's engine, at whatever associate UDA rate the market charges today rather than the notional cost the seller's accounts imply. A contract that only works because the owner does the dentistry cheaply is worth less to you than it is to them, and the difference belongs in the price.
The contract's own UDA value against what you will pay associates per UDA is what defines the margin. Where that gap is thin, the practice depends on the principal's chair time to be profitable at all, and the valuation should be built on maintainable profit after paying someone market rate to do that work. Our note on how dental practices are valued covers how that adjustment is made.
None of this makes NHS practices bad buys — the predictability of contracted income is genuinely valuable, and it is what makes these deals fundable in the first place. It makes them buys where the delivery numbers need testing with the same rigour as the profit numbers, because the delivery numbers are where the unpriced liabilities live. That test is a standard part of our due diligence — see buying a practice, step by step.
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The commissioner recovers money. Clawback applies up to the value of the activity target that was not delivered, and a breach notice is issued alongside it. On a 12,000 UDA contract worth £360,000, a UDA is valued at £30, so delivering 94% leaves a 720 UDA shortfall and £21,600 recoverable. The breach notice matters as much as the money for a buyer, because a pattern of notices affects the commissioner's view of the contract and can complicate a later variation or sale. Reconciliation is annual and concludes by the September following the financial year end, so the position is confirmed some months after the year closes.
No money is recovered, which is exactly why it catches buyers out. The undelivered activity carries forward into the next financial year instead, and it must be completed before any new activity counts towards the following year's target. A practice delivering 97% of a 12,000 UDA contract carries 360 UDAs forward each year, so three consecutive years at 97% leaves 1,080 UDAs of accumulated obligation. The buyer's first year then needs 13,080 UDAs to stay compliant — 9% more than the seller ever delivered — while the accounts show three years of a fully paid contract with no clawback at all.
Contractors holding mandatory services contracts of 100 UDAs or more must direct 8.2% of their Relevant Contract Value to urgent care, calculated as 11 urgent courses of treatment for every £10,000 of contract value, rounded up to the nearest whole number. A £360,000 contract therefore requires 396 urgent courses a year. Payment is a £15 fixed payment plus a £60 activity payment within the requirement, and £75 for courses above it; contractors not required to prioritise urgent care receive £75 per course. There is also a mid-year checkpoint, where failing to deliver 30% of the required treatments triggers commissioner action.
Only within limits, and the limits are tighter than most principals realise. Delivery between 100% and 102% carries forward and counts towards the following year, which gives a modest buffer. Anything above 102% is not carried forward and is not paid for — the activity is retained by the NHS and the practice has effectively worked for nothing. This is why a contract rescued by a frantic year-end push is a warning rather than a reassurance: the practice cannot bank the surplus in a good year to cover a bad one, so the pattern tends to repeat until a year comes along where the push falls short.
Treat the balance as a liability you are assuming, and price it the way you would price any other assumed obligation. Quantify it in UDAs, convert it at the contract's UDA value, and then consider what it costs you to deliver: if you will pay an associate a market rate per UDA to work through the backlog, the real cost is the associate cost plus the nursing and surgery time, against activity for which the seller has already been paid. On a 1,080 UDA balance that is a material adjustment, and it is a straightforward one to raise, because the reconciliation statements evidence it precisely.
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