Accounting for Private Patient Plans: Denplan, Practice Plan and In-House Schemes

Private patient plans change the rhythm of a practice's income. Instead of charging per item of treatment, the practice receives a fixed monthly capitation payment for each registered patient, and in return provides the treatment covered by the plan as the patient needs it. For the accounts, the key discipline is to record the gross plan income the patient pays, not the net amount that lands in the practice bank account after the plan provider takes its fee. This piece sits alongside the companion guides on reconciling NHS Compass to your ledger and tracking Units of Dental Activity.

How a capitation plan pays the practice

Denplan, part of Simplyhealth, is the largest UK dental plan provider, with a capitation model used by thousands of registered practices. The patient pays a fixed monthly amount by direct debit to the plan administrator. The administrator deducts an administration fee and pays the balance to the practice, usually monthly. Practice Plan and DPAS operate on the same basic structure, and many practices also run their own in-house membership scheme where the practice collects the direct debit itself.

The cash that arrives in the practice account is therefore net of the administrator's fee. If the bookkeeping simply records that bank receipt as income, the practice understates both its turnover and its costs, and loses the audit trail back to the number of registered patients.

Recording gross income and the administrator fee

The correct treatment records the gross plan income the patients pay as practice turnover, and the administrator's fee as a separate expense. A practice with 1,000 plan patients at £20 a month records £20,000 of monthly plan income and the administrator fee as a cost, even though only the net figure reaches the bank. This keeps turnover aligned to the patient base and makes the administrator fee visible as the cost it is, rather than burying it inside a netted-down revenue line.

The monthly statement from the plan provider is the source document. It shows the registered patient count, the gross collected, the fee deducted and the net paid over, which is exactly the breakdown the ledger needs.

The VAT position underneath the plan

Dental treatment provided by a registered dental professional is exempt from VAT as healthcare, so the clinical income side of a plan does not carry VAT. The administration service is treated differently. The Court of Justice of the European Union held in the AXA UK case (which concerned the Denplan service) that the payment-handling service the plan administrator provides is not exempt, because it is administrative in nature rather than exempt medical care. In practice this means the administrator's fee can carry VAT, which a VAT-exempt dental practice generally cannot reclaim, so it is a real cost to the practice rather than a recoverable one.

In-house schemes and what changes

A practice that runs its own membership scheme keeps the administrator margin but takes on the work and the regulatory exposure. Collecting regular payments and promising future treatment can stray into regulated insurance or payment-services territory, which is why many practices use an authorised provider rather than self-administer. Where a practice does run an in-house scheme, the accounting is cleaner in one respect, because the gross direct debit is the income with no third-party fee to strip out, but the practice must hold the funds appropriately and recognise income across the period the cover relates to rather than all at once.

Reconciling the plan statement to the ledger

1. Take the monthly plan-provider statement as the control document for registered patient numbers and gross collected.
2. Post gross plan income to turnover and the administrator fee to a dedicated expense code.
3. Match the net figure on the statement to the bank receipt, and investigate any difference.
4. Reconcile the registered patient count month on month, because joiners and leavers move the income before anyone changes a price.
5. Keep plan income in its own revenue category, separate from fee-per-item private work and NHS Compass income, so the three streams can be analysed independently.

Common questions about plan accounting

Should I record plan income gross or net?

Gross. Record the full amount patients pay as turnover and show the administrator fee as a separate expense. Recording only the net receipt understates turnover and hides the cost of the plan.

Can the practice reclaim the VAT on the administrator fee?

Usually not. Dental practices are generally VAT-exempt because their treatment income is exempt, and an exempt business cannot reclaim input VAT on its costs. The administrator fee is therefore a gross cost to most practices.

Is plan income NHS or private for the accounts?

Private. Capitation plan income is private revenue and should be kept separate from NHS Compass income, which runs on a different contractual and payment basis. Mixing them obscures the profitability analysis of each side of the practice.

When should plan income be recognised?

Across the period the cover relates to. Monthly capitation income matches the month it covers, which is straightforward for provider-run schemes. An in-house scheme that takes payment in advance should spread the income over the cover period rather than booking it all on receipt.