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Part of NHS Digital Annual Report and Accounts 2019 to 2020

Accounts: 2019-20

Financial statements for NHS Digital for the year 2019-20, and notes to the accounts.

Paramedic looks at app on phone, in front of ambulance

Statement of comprehensive net expenditure for the year ended 31 March 2020

Expenditure Note

2019-20

(£000)

2018-19

(£000)

Staff costs 3 179,841 177,798
Termination benefits 3 8,359 11,165
Operating expenditure 5 223,988 218,031
Depreciation and amortisation 5 52,355 33,705
Net impairments of non-current assets 5 729 -
Loss on disposal of non-current assets 5 1,846 217
Total expenditure   467,118 440,916
Less income 4 (43,519) (33,583)
Net operating expenditure for the financial year   423,599 407,333
Net expenditure for the financial year   423,599 407,333
Other comprehensive net expenditure Note

2019-20

£000

2018-19

£000

Items not included in operating costs: - - -

Net gain on revaluation of property, plant and equipment

6 (1,210) -
Net gain on revaluation of intangible assets 7 (8,327) -
Comprehensive net expenditure for the year - 414,062 407,333

All income and expenditure derives from continuing operations.

Notes 1 to 20 form part of these financial statements.


Statement of financial position at 31 March 2020

Non-current assets Note

31 March 2020

£000

31 March 2019

£000

Property plant and equipment 6 27,304 24,101
Intangible assets 7 188,301 136,140
Other non-current receivables 8 11,296 6,103
Total non-current assets   226,901 166,344
Current assets Note

31 March 2020

£000

31 March 2019

£000

Trade and other receivables 9 32,676 25,096
Cash and cash equivalents 10 19,837 21,204
Total current assets   52,513 46,300
Total assets   279,414 212,644
Current liabilities Note

31 March 2020

£000

31 March 2019

£000

Trade and other payables 11 (66,633) (61,934)
Provisions 12 (91) (1,543)
Total current liabilities   (66,724) (63,477)
Total assets less current liabilities   212,690 149,167
Non-current liabilities Note

31 March 2020

£000

31 March 2019

£000

Provisions 12 (4,251) (3,666)
Total assets less total liabilities - 208,439 145,501
Taxpayers' equity  and other reserves Note

31 March 2020

£000

31 March 2019

£000

General reserve - 201,520 145,501
Revaluation reserve - 6,919 -
Total taxpayers' equity and other reserves - 208,439 145,501

Notes 1 to 20 form part of these financial statements.

The financial statements on this page (‘Accounts’) were approved by the Board on 30 June 2020 and signed on its behalf by: 

Sarah Wilkinson
Chief Executive
7 July 2020


Statement of cash flows for the year ended 31 March 2020

Cash flows from operating activities Note

2019-20

£000

2018-19

£000

Net operating expenditure for the financial year - (423,599) (407,333)
Adjustment for non-cash transactions: - - -
- depreciation and amortisation 5 52,355 33,705
- reversal of impairments of property, plant and equipment 5 (132) -
- impairments of intangible assets 5 861 -
- loss on disposal of non-current assets 5 1,846 217
- provisions arising during the year 12 677 2,784
- provisions reversed unused 12 (698) (158)
Increase in non-current receivables 8

(5,193)

(3,058)
(Increase) / decrease in trade and other receivables 9 (7,580) 6,053
Increase in trade and other payables 11 4,699 19,558
(Increase) / decrease in in capital payables and accruals - (8,681) 1,133
Provisions utilised 12 (846) (27)
Net cash outflow from operating activities - (386,291) (347,126)
Cash flows from investing activities Note

2019-20

£000

2018-19

£000

Purchase of property, plant and equipment - (6,666) (5,620)
Purchase of intangible assets - (85,410) (71,979)
Net cash outflow from investing activities - (92,076) (77,599) 
Cash flows from financing activities Note

2019-20

£000

2018-19

£000

Grant in aid from the Department of Health and Social Care: cash drawn down in the year - 477,000 422,000
Net financing   477,000 422,000
Net decrease in cash in the period 10 (1,367) (2,725)
Cash and cash equivalents at the beginning of the period 10 21,204 23,929
Cash and cash equivalents at the end of the period 10 19,837 21,204
Net decrease in cash in the period 10 (1,367) (2,725)

All cash flows relate to continuing activities.


Statement of changes in taxpayers’ equity for the year ended 31 March 2020

General reserve

£000

Revaluation reserve

£000

Total reserves

£000

Balance at 31 March 2018

130,834

- 130,834
Changes in taxpayers' equity

General reserve

£000

Revaluation reserve

£000

Total reserves

£000

Net expenditure for the financial year (407,333) - (407,333)
Total recognised income and expense (407,333) - (407,333)
Grant in aid from the Department of Health and Social Care: cash drawn down in the year 422,000 - 422,000
Total grant-in-aid funding 422,000 - 422,000
Balance at 31 March 2019 145,501 - 145,501
Changes in taxpayers' equity

General reserve

£000

Revaluation reserve

£000

Total reserves

£000

Balance at 31 March 2019 145,501 - 145,501
Net expenditure for the financial year (423,599) - (423,599)
Gain on the revaluation of property plant and equipment - 1,210 1,210
Gain on the revaluation of intangible assets - 8,327 8,327
Movement between reserves 2,618

(2,618)

-
Total recognised income and expense (420,981) 6,919 (414,062)
Grant in aid from the Department of Health and Social Care: cash drawn down in the year 477,000 - 47,000
Total grant-in-aid funding 477,000 - 477,000
Balance at 31 March 2020 201,520 6,919 208,439

Note 1 to the accounts

1.1 General information 

The Health and Social Care Information Centre (NHS Digital) is an executive non-departmental government body established under the Health and Social Care Act 2012. The address of its registered office and principal place of business are disclosed in the introduction to the annual report. The principal activities of NHS Digital are to improve health and care by providing national information, data and IT services for patients, clinicians, commissioners and researchers. It is accountable to the Secretary of State for Health and Social Care for discharging its functions, duties and powers effectively, efficiently and economically. The Department of Health and Social Care actively undertakes this role on his behalf on a day-to-day basis.

1.2 Basis of accounting

The financial statements have been prepared in accordance with the 2019-20 Government Financial Reporting Manual (FReM) and amendments to it, issued by HM Treasury as interpreted for the health sector in the Department of Health and Social Care Group Accounting Manual (GAM). The accounting policies contained in the FReM apply International Financial Reporting Standards (IFRS) as adopted and interpreted for the public sector context. Where the FReM permits a choice of accounting policy, the accounting policy which is judged to be most appropriate to the particular circumstances for the purpose of giving a true and fair view has been selected. The particular policies adopted by NHS Digital are described below. They have been applied consistently in dealing with items that are considered material to the accounts.

These accounts have been prepared under the historical cost convention, modified to account for the revaluation of non-current assets. This is in accordance with directions issued by the Secretary of State for Health and Social Care and approved by HM Treasury.

The presentational currency is pounds sterling and, unless otherwise stated, the accounts have been prepared to the nearest pounds thousands (£000).

No accounting standard changes were adopted early in 2019-20.

The FReM does not require the following standards and interpretations to be applied in 2019-20:

  • IFRS 16 Leases - implementation for those entities that follow the FReM has been deferred for a further year until 2021-22. NHS Digital currently has total future commitments under operating leases of £109 million, which IFRS 16 would require to be recognised on the statement of financial position as right of use assets with corresponding lease liabilities. NHS Digital has assessed the extent to which services other than those currently identified as containing a lease per IAS 17 and IFRIC 4 may be identified as a right of use asset under the revised recognition criteria. As at 2019-20, there were no further right of use assets identified
  • IFRS 17 Insurance Contracts - effective for accounting periods beginning on or after 1 January 2021, but not yet adopted by the 2019-20 FReM. The application of IFRS 17 would not have a material impact on the accounts for 2019-20, had it been applied in the year

1.3 Income

Income is recognised to the extent that it is probable that the economic benefits will flow to NHS Digital and the income can be reliably measured.

The main source of funding is a parliamentary grant from the Department of Health and Social Care, known as ‘grant-in-aid’, within an approved cash limit, which is credited to the general reserve. The grant-in-aid is recognised in the financial period in which it is received.

In line with IFRS 15, contract income is not recognised until a signed agreement is in place. 

Income is recognised in proportion to the fulfillment of the performance obligations set out in the agreement. Some performance obligations may be fulfilled by third parties under contract. Performance obligations are satisfied as data, reports and analysis are supplied, or by the passage  of time  as the service is delivered, or as time and  material costs  are incurred, or by the fulfillment of specific milestones. Where recognition is based on time and materials incurred or achievement of milestones, income is recognised as progress and/or costs incurred are agreed with the customer, either by correspondence or at project and programme boards.

The practical expedient in IFRS 15.121 has not been applied. All consideration for contracts is received in the form of cash. Warranties are not offered in relation to services provided, and hence refunds and returns do not apply. There are no assets recognised from the costs incurred to obtain or fulfil a contract with a customer.

Non-contract income is recognised when it has been invoiced, and relates to smaller income streams.

All prices are based on full cost recovery.

Contract liabilities refer to income received or credited in the year for which the related costs have not yet been incurred.

1.4 Taxation

NHS Digital is not liable to pay corporation tax. Income is shown net of VAT, and expenditure is shown net of recoverable VAT. Irrecoverable VAT is charged to the most appropriate expenditure heading or capitalised if it relates to a non-current asset.

1.5 Losses and special payments 

Losses and special payments are items that Parliament would not have contemplated when it agreed funds for the health service or passed legislation. By their nature they are items that ideally should not arise. They are therefore subject to special control procedures compared with the generality of payments. They are divided into different categories, which govern the way each individual case is handled.

Losses and special payments are charged to the relevant functional headings in the statement of comprehensive net expenditure. A detailed breakdown is contained in the Parliamentary Accountability and Audit Report.

1.6 Employee benefits

Salaries, wages and employment-related payments are recognised in the period in which the service is received from employees. The cost of leave earned but not taken by employees at the end of the period is recognised in the financial statements to the extent that employees are permitted to carry forward leave into the following period.

1.7 Non-current assets

A. Capitalisation

All assets falling into the following categories are capitalised:

1) Intangible assets include software development expenditure and the purchase of computer software licences, where they are capable of being used for more than one year and:

  • individually have a cost equal to or greater than £5,000; or
  • collectively have a cost of at least £5,000 and, the assets are functionally interdependent, they had broadly simultaneous purchase dates, are anticipated to have simultaneous disposal dates and are under single managerial control

Development expenditure is transferred to other categories of non-current assets when the development is sufficiently complete to enable the asset as a whole to be fully deployed and effective for the management’s intended purpose.

2) Tangible assets which are capable of being used for more than one year, and:

  • individually have a cost equal to or greater than £5,000; or
  • collectively have a cost of at least £5,000 and, the assets are functionally interdependent, they had broadly simultaneous purchase dates, are anticipated to have simultaneous disposal dates and are under single managerial control; or
  • form part of the initial equipping and setup cost of a new asset irrespective of their individual cost

Internally generated assets are recognised if, and only if, all of the following have been demonstrated:

  • the technical feasibility of completing the intangible asset so that it will be available for use
  • the intention to complete the intangible asset and use it
  • the ability to use the intangible asset
  • how the intangible asset will generate probable future economic benefits
  • the availability of adequate technical, financial and other resources to complete the intangible asset and use it
  • the ability to measure reliably the expenditure attributable to the intangible asset during its development

Expenditure on research activities and project management costs are recognised as an expense in the period in which it is incurred.

B. Carrying gross cost

Non-current assets are initially recognised at cost, including expenditure such as installation directly attributable to bringing them into working condition. Subsequently, non-current assets are held at current value in existing use. Any increase in value is credited to the revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised as an expense, in which case the increase is credited to the statement of comprehensive net expenditure to the extent of the decrease previously expensed. A decrease in carrying amount arising on the restatement in value of the asset is charged as an expense to the extent that it exceeds the balance, if any, held in the revaluation reserve relating to a previous revaluation of that asset.

Freehold land and buildings are externally revalued every three years, and are held at this amount until the next revaluation is undertaken.

Other assets are assessed either using appropriate indices provided by the Office for National Statistics or, in the case of internal software developments, by considering the inflation rates of staff and other resources and other potential efficiency factors. The current value in existing use at March 2020 is significantly different to the original historic cost and all assets have been revalued in the year, except software licences, where indexation has been applied up to 31 March 2019; indexation for the year to 31 March 2020 was not applied to software licences due to late changes to the index, and the impact being immaterial. Previously, the assets were held at historic cost as the application of indices and other factors was not materially different. The carrying values of all assets are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be appropriate.

C. Depreciation

Development expenditure is not depreciated until such time as the asset is available for use. Otherwise, depreciation and amortisation is charged on a straight-line basis to write off the costs or valuation of tangible and intangible non-current assets, less any residual value, over their estimated useful lives as follows:

1) Intangible software development assets are amortised, on a straight-line basis, over the estimated life of the asset or 10 years, whichever is less. The asset lives are reviewed on an annual basis considering the degree of evolution of the asset and what plans, if any, are being made for its replacement

2) Purchased computer software licences are amortised over the term of the licence

3) Property, plant and equipment is depreciated on a straight-line basis over its expected useful life as follows:

  • buildings: 40 years
  • fixtures and fittings: 1-14 years
  • office, information technology, short life equipment: 1-5 years

The estimated useful lives and residual values are reviewed annually.

1.8 Research and development 

Expenditure incurred on pure and applied research is treated as an operating charge in the year in which it is incurred. Development expenditure is for the development of specific business systems. Expenditure which does not meet the criteria for capitalisation is treated as an operating cost in the year in which it is incurred. Development expenditure meeting the criteria for capitalisation is treated as an intangible asset under construction until such time as the asset is brought into use.

1.9 Leases

Leases are classified as finance leases when substantially all the risks and rewards of ownership are transferred to the lessee. All other leases are classified as operating leases.

Amounts held under finance leases are initially recognised, at the inception of the lease, at fair value or, if lower, at the present value of the minimum lease payments, with a matching liability for the lease obligation to the lessor. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the statement of comprehensive net expenditure.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. Lease incentives are recognised initially as a liability and subsequently as a reduction of rentals on a straight-line basis over the lease term.

Contingent rentals are recognised as an expense in the period in which they are incurred.

1.10 Provisions

Provisions are recognised when a present obligation exists as a result of a past event, and it is probable that NHS Digital will be required to settle that obligation. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the reporting date, and are discounted to present value where the effect is material.

1.11 Contingent liabilities

In addition to contingent liabilities disclosed in accordance with IAS 37, NHS Digital discloses for parliamentary reporting and accountability purposes certain statutory and non-statutory contingent liabilities where the likelihood of a transfer of economic benefit is remote, but which have been reported to Parliament in accordance with the requirements of the GAM. Where the time value of money is material, contingent liabilities that are required to be disclosed under IAS 37 are stated at discounted amounts and the amount reported to Parliament separately noted. Contingent liabilities that are not required to be disclosed by IAS 37 are stated at the amounts reported to Parliament.

1.12 Pensions

Past and present employees are covered by a number of pension schemes including the NHS Pension Scheme and the Principal Civil Service Pension Scheme. These schemes are unfunded, defined benefit schemes. They are not designed to be run in a way that would enable NHS bodies to identify their share of the underlying scheme’s assets and liabilities. Therefore, the schemes are accounted for as if they were defined contribution schemes, with the cost to the body participating in the scheme taken as equal to the contributions payable to the scheme for the accounting period. Early retirements, other than those due to ill health, are not funded by the schemes. The full amount of the liability for the additional costs is charged to expenditure at the time the retirement agreement is committed, regardless of the method of payment.

1.13 Critical accounting judgements and key sources of estimation uncertainty

In the application of the accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying value of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the critical judgements and estimations that the directors have made in the process of applying the accounting policies and that have the most significant effect on the amounts recognised in financial statements:

  • dilapidation provision - NHS Digital has provided £3.6 million in respect of anticipated dilapidation costs of its leased accommodation across its estate where required. Management has used external property advisors to assess likely liabilities at the end of the leases
  • termination benefits provision - NHS Digital is undertaking a significant internal restructure to meet the future expectations of the organisation. This restructure is split into three waves and the first two waves are complete. Costs of £8.4 million have been accounted for, in 2019-20 of which £4.5 million has been accrued. The calculations are based on specific individual quotes for assumed departure dates
  • employment taxes - Liabilities have been identified for several employment-related taxes, which have been included in accruals. This includes £4.3 million for IR35 and £0.3 million for employees’ home-to-work travel. The calculations follow HMRC methodology, but have yet to be finalised
  • developed systems - NHS Digital manages a suite of national infrastructure systems as well as a number of large internal data collection systems and databases. Much of the development of such systems is undertaken in-house and a detailed assessment is required to determine the level of capitalisation of such work, including the percentage used to determine the ratio of capital work for each individual. In addition, management undertake an annual review of the likely asset life over which these systems should be amortised

1.14 Business and geographical segments

NHS Digital has adopted IFRS 8 Operating Segments. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the business that are regularly reviewed by the Chief Executive, to allocate resources to the segments and to assess their performance.

1.15 Cash and cash equivalents

Cash is cash-in-hand and deposits with any financial institution repayable without penalty on notice of not more than 24 hours. Cash equivalents are investments that mature in 3 months or less from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.

1.16 Financial instruments

NHS Digital has adopted IFRS 9 Financial Instruments in line with the FReM. This has not had a material impact. NHS Digital operates largely in a non-trading environment and the majority of its income is from other government or NHS bodies. Consequently NHS Digital is not exposed to the significant degree of financial risk that is faced by most other business entities. NHS Digital has no borrowings and relies largely on grant in aid from the Department of Health and Social Care for its cash requirements. NHS Digital is therefore not exposed to liquidity risks. All cash balances are held within the Government Banking Service and all material assets and liabilities are denominated in sterling, so it is not exposed to interest rate or material currency risks.

Financial assets are recognised on the statement of financial position when NHS Digital becomes party to the financial instrument contract or, in the case of trade receivables, when the goods or services have been delivered. Financial assets are derecognised when the contractual rights have expired or the asset has been transferred. NHS Digital has no financial assets other than trade receivables. Trade receivables do not carry any interest and are stated at their nominal value, less any provision for expected credit losses.

Financial liabilities are recognised on the statement of financial position when NHS Digital becomes party to the contractual provisions of the financial instrument or, in the case of trade payables, when the goods or services have been received. Financial liabilities are derecognised when the liability has been discharged, that is, the liability has been paid or has expired. NHS Digital has no financial liabilities other than trade payables. Trade payables are not interest bearing and are stated at their nominal value.

1.17 Going concern

The NHS Digital financial statements have been produced on a going concern basis. Confirmation has been received of the main grant-in-aid budget allocation for the 2020-21 financial year in line with the business plan submitted, and funding flows have already commenced.


Note 2: Statement of operating costs by activity

IFRS 8 requires operating segments to be defined on the basis of internal reports that are regularly reviewed by the Chief Executive. The NHS Digital Executive Management Team monitors the performance and resources of the organisation by directorate. The statement of financial position is reported internally as a single segment. Accordingly, no segmental analysis of assets and liabilities is reported. The majority of income is derived from other bodies within the Department of Health and Social Care group, and more than 10% of total income is received from the following customers: NHS England (£21.3 million), Public Health England  (£10 million) and the Department of Health and Social Care (£4.9 million).

For the year ended 31 March 2020

Financial category

Assurance and Risk Management

£000

Corporate Services

£000

Data services

£000

Live Services and Cyber Security

£000

Platforms and Infrastructure

£000

Product Development

£000

Strategy, Policy and Governance

£000

Central (not allocated to a segment)

£000

Total

£000

Income (37) (300) (15,354) (623) (1,604) (21,439) (915) (3,247) (43,519)
Staff costs 3,306 21,186 38,390 30,073 28,872 57,674 8,696 3 188,200
Professional fees 390 3,054 5,108 14,391 26,080 11,618 3,431 (299) 63,773
Information technology 1 1,179 4,375 43,350 73,047 14,651 129 (648) 136,084
Accommodation 15 10,428 31 51 7 111 88 220 10,951
Travel and subsistence 37 1,144 429 372 379 1,585 191 (2) 4,135
Marketing, training, events and communications 18 3,867 153 1,522 46 221 391 1 6,219
Office services - 1,623 24 22 254 60 199 18 2,200
Other - 389 18 2 3 2 - 212 626
Loss on disposal of non-current assets - 24 177 - 269 1,376 - - 1,846
Depreciation  and amortisation 151 2,504 6,409 2,205 21,219 19,851 18 (2) 52,355
Reversal of impairment - property, plant and equipment - - - - - - - (132) (132)
Impairments of intangible assets - - - - 5 - - 856 861
Reallocation of central costs 636 (45,098) 14,449 10,425 (3,637) 21,046 2,179 - -
Total non-staff costs 1,248 (20,886) 31,173 72,340 117,672 70,521 6,626 224 278,918
Net expenditure 4,517 - 54,209 101,790 144,940 106,756 14,407 (3,020) 423,599

The reallocation of central costs attributes central overheads to programmes and services. The composition of directorates has changed during the year, and the figures for 2018-19 are not directly comparable.

Assurance and Risk Management

Provides independent assurance that strategic and delivery risks are being managed appropriately and in line with our approach to risk across live services, change programmes and corporate functions. Provides oversight to ensure compliance with standards and accurate and timely information, intelligence, analysis, and insight to enable robust decision-making.

Corporate Services

The centre of expertise and management for financial, commercial, people and workforce functions. Is delivering the Org 2 transformation programme, which is reshaping the way NHS Digital organises itself, develops its capabilities and supports the work of its programmes.

Data Services

As the data custodian for the health and care system, has primary responsibility for improving data quality and our ability to link data, transforming our data architecture and platforms and providing independent and reliable statistics to guide policy and research. All work is guided by an absolute respect for data privacy and a commitment to empowering healthcare research and the UK life sciences sector.

Live Services and Cyber Security

Responsible for the reliable performance and secure operation of all of the live systems and services that we operate for the health and care system. Includes the Information Technology Operations Centre and the Cyber Security Operations Centre.

Platforms and Infrastructure

Provides the core infrastructure and platforms that connect digital service providers across the health and care system and delivers platforms to support NHS Digital’s data management and product development.

Product Development

Designs and delivers new applications and services commissioned by NHS England, NHS Improvement, Public Health England and other arm’s-length bodies to help citizens, patients and clinicians across primary, secondary and social care. Works with the external healthcare market and fosters digital knowledge and capabilities across the system.

Strategy, Policy and Governance

Defines our strategic direction based on the needs of our clients and evolving political, technical, government and market environments. Liaises with the Department of Health and Social Care, third parties and internal teams to ensure coherent and clear policies and governance. Provides clinical and information governance, guidance and oversight.

For the year ended 31 March 2019

Represented1

Assurance and Risk Management

£000

Corporate Services

£000

Data, Services

£000

Live Services and Cyber Security

£000

Platforms and Infrastructure

£000

Product Development

£000

Strategy, Policy and Governance

£000

Central (not allocated to a segment)

£000

Total

£000

Income (453) (407) (12,491) (342) (2,591) (16,926) (373) - (33,583)
Staff costs 11,610 20,301 36,126 19,107 43,837 49,760 8,117 105 188,963
Professional fees 345 2,251 8,308 4,590 25,450 21,174 3,235 207 65,560
Information technology 53 994 6,664 16,880 82,079 19,832 203 58 126,763
Accommodation 11 10,024 62 24 31 167 34 1,220 11,573
Travel and subsistence 165 1,619 615 340 639 2,152 249 5 5,784
Marketing, training and events 21 3,087 110 729 127 413 443 7 4,937
Office services 1 1,755 28 6 225 101 80 4 2,200
Other - 516 1 - 3 2 2 690 1,214
Loss on disposal of non-current assets - 45 - - 96 76 - - 217
Depreciation and amortisation 58 884 3,790 178 17,939 10,490 365 1 33,705
Reallocation of central costs 3,496 (41,069) 14,275 6,914 (6,220) 20,479 2,125 - -
Total non-staff costs 4,150 (19,894) 33,853 29,661 120,369 74,886 6,736 2,192 251,953
Net expenditure 15,307 - 57,488 48,426 161,615 107,720 14,480 2,297 407,333

1Figures for the year ended 31 March 2019 have been represented to reflect the format used for the year ended 31 March 2020.


Note 3: Staff costs

Permanent staff

2019-20

£000

2018-19

£000

Salaries and wages 129,541 142,608
Social security costs 14,473 16,417
Apprenticeship levy  633 681
Employer superannuation contributions - NHSPS 24,025 17,778
Employer superannuation contributions - other 545 439
Staff seconded to other organisations 684 1,159
Capitalised employed staff costs (11,951) (16,669)
Total 157,950 162,413

 

Other staff 

2019-20

£000

2018-19

£000

Temporary staff 7,688 5,049
Contractors 14,407 10,551
Staff seconded from other organisations 1,063 693
Capitalised other staff costs (1,267) (908)
Total other staff costs 21,891 15,385
Total staff costs 179,841 177,798
Termination benefits 8,359 11,165
Total staff costs including termination benefits 188,200 188,963

There were no amounts spent on staff benefits during the year and there were two early retirements on the grounds of ill health.


Note 4: Income

Income analysed by classification and activity is as follows:

Contract income

2019-20

£000

2018-19

£000

Programme and project management 5,727 5,428
Service delivery 33,012 23,000
Surveys and data collection 1,165 1,099
Fees and charges 2,385 2,229
Total contract income 42,289 31,756
Non-contract income

2019-20

£000

2018-19

£000

Service delivery 256 401
Surveys and data collection - 2
Non-trading income 845 1,371
Apprenticeship levy utilisation 129 53
Total non-contract income 1,230 1,827
Total income 43,519 33,583

Income from programme and project management relates to workstreams primarily for the Department of Health and Social Care, NHS England and Public Health England, together with staff time recharged to the Department of Health and Social Care national programmes.

Income from service delivery covers a range of data management, system support and hosting, training and helpdesk services.

Income from surveys and data collection refers to undertaking health surveys and other data collection activities.

Fees and charges relate to data services.

£590,217 of income was included in contract liabilities at 31 March 2019 and £485,571 of this has been recognised in 2019-20. The balance relates to future periods.

Payment terms are 14 days for all income types.

Contract income expected to be recognised in future periods related to contract performance obligations not yet completed at the reporting date:

2019-20

Contract income not yet invoiced

£000

Contract income invoiced and deferred

£000

Total

£000

Not later than one year 2,017 1,127 3,144
Between one and five years 588 168 756
Later than five years - 30 30
Total 2,605 1,325 3,930
2018-19

Contract income not yet invoiced

£000

Contract income invoiced and deferred

£000

Total

£000

Not later than one year 2,788 487 3,275
Between one and five years 842 103 945
Later than five years - - -
Total 3,630 590 4,220

Note 5: Non-staff expenditure

Expenditure

2019-20

£000

2018-19

£000

Workpackages and professional fees 57,598 59,327
Data collection and surveys 4,122 4,478
Legal fees 1,694 1,429
Chair and non-executive directors’ emoluments 124 122
Marketing, training and events 5,744 4,447
Travel 4,135 5,784
Premises and establishment 10,958 12,050
IT maintenance and support 23,991 27,332
IT managed services 112,093 99,431
General office supplies and services 2,302 1,968
Communications 346 437
Insurance 189 167
External audit fees 115 115
Internal audit fees 244 211
Apprenticeship levy training 129 53
(Reversal of expected credit loss) / expected credit loss on contract receivables (2) 2
Expected credit loss on non-contract receivables 27 3
Other 179 675
Total operating expenditure 223,988 218,031
Depreciation - property, plant and equipment 10,971 8,500
Amortisation - intangible assets 41,384 25,205
Reversal of impairment - property, plant and equipment (132) -
Impairments - intangible assets 861 -
Loss on disposal of non-current assets 1,846 217
Total non-cash transactions 54,930 33,922
Total non-staff expenditure 278,918 251,953

Note 6: Non current assets - property, plant and equipment

2019-20

Cost or valuation

Land

£000

Buildings

£000

Assets under construction

£000

Computer hardware

£000

Fixtures and fittings

£000

Total

£000

At 1 April 2019 310 1,170 - 46,233 10,644 58,357
Additions - 45 5,838 6,036 1,049 12,968
Reclassification - - 18 (48) 30 -
Disposals - - - (3,739) (219) (3,958)
Impairments and reversals to other
operating expenditure
- 164 - - - 164
Revaluation and indexation to
revaluation reserve
- 779 1 2,255 748 3,783
At 31 March 2020 310 2,158 5,857 50,737 12,252 71,314
Depreciation

Land

£000

Buildings

£000

Assets under construction

£000

Computer hardware

£000

Fixtures and fittings

£000

Total

£000

At 1 April 2019 - 477 - 29,256 4,523 34,256
Provided during the year - 32 - 8,450 2,489 10,971
Disposals - - - (3,627) (195) (3,822)
Impairments and reversals to other
operating expenditure
- 32 - - - 32
Revaluation and indexation to
revaluation reserve
- 352 - 1,735 486 2,573
At 31 March 2020 - 893 - 35,814 7,303 44,010
Net book value at 1 April 2019 310 693 - 16,977 6,121 24,101
Net book value at 31 March 2020 310 1,265 5,857 14,923 4,949 27,304

The total depreciation charged in the statement of comprehensive net expenditure in respect of assets held under finance leases and hire purchase contracts was £236,842.

The gross cost of property, plant and equipment that has been fully depreciated but is still in use is £19,388,635.

The freehold building was independently valued in March 2019 at existing use by the local District Valuation Office, and the difference in valuation has been reflected in 2019-20 above.

All tangible assets are owned by NHS Digital, except computer hardware with a net book value of £1,468,418 held under a finance lease. There were no finance lease liabilities outstanding at 31 March 2020.

Movement in the revaluation reserve: property, plant and equipment

2019-20

£000

2018-19

£000

Balance at 1 April - -
Net gain on revaluation of property, plant and equipment 1,210 -
Transfer to the general reserve (358) -
Balance at 31 March 852 -

2018-19

Cost or valuation

Land

£000

Buildings

£000

Computer hardware

£000

Fixtures and fittings

£000

Total

£000

At 1 April 2018 310 1,170 48,339 9,922 59,741
Additions - - 2,442 2,519 4,961
Reclassifications - - (469) - (469)
Disposals - - (4,079) (1,797) (5,876)
At 31 March 2019 310 1,170 46,233 10,644 58,357
Depreciation

Land

£000

Buildings

£000

Computer hardware

£000

Fixtures and fittings

£000

Total

£000

At 1 April 2018 - 435 25,600 5,454 31,489
Provided during the year - 42 7,624 834 8,500
Reclassifications - - (8) - (8)
Disposals - - (3,960) (1,765) (5,725)
At 31 March 2019 - 477 29,256 4,523 34,256
Net book value at 1 April 2018 310 735 22,739 4,468 28,252
Net book value at 31 March 2019 310 693 16,977 6,121 24,101

The total depreciation charged in the statement of comprehensive net expenditure in respect of assets held under finance leases and hire purchase contracts was £nil.

The gross cost of property, plant and equipment that has been fully depreciated but is still in use is £14,850,382.

The freehold building was independently valued in March 2019 at existing use by the local District Valuation Office. The difference in valuation is not reflected in the 2018-19 figures above*.

All tangible assets are owned by NHS Digital.

*Text from 2018-19 accounts has been amended


Note 7: Non-current assets - intangible assets

2019-20

Cost or valuation

Software licences

£000

Information technology

£000

Development expenditure

£000

Websites

£000

Total

£000

At 1 April 2019 16,013 191,438 18,372 3,011 228,834
Additions 21,603 51,601 14,175 410 87,789
Reclassification - 9,592 (9,762) 170 -
Impairments and reversals to other
operating expenditure
(2,595) (16) - - (2,611)
Revaluation and indexation to
revaluation reserve
(1,427) 12,986 904 152 12,615
Disposals (898) (4,735) (920) (325) (6,878)
At 31 March 2020 32,696 260,866 22,769 3,418 319,749
Amortisation

Software licences

£000

Information technology

£000

Development expenditure

£000

Websites

£000

Total

£000

At 1 April 2019 10,484 80,757 - 1,453 92,694
Provided during the year 4,498 36,439 - 447 41,384
Reclassification - 182 - (182) -
Impairments and reversals to other
operating expenditure
(1,738) (12) - - (1,750)
Revaluation and indexation to
revaluation reserve
(1,427) 5,681 - 34 4,288
Disposals (896) (3,947) - (325) (5,168)
At 31 March 2020 10,921 119,100 - 1,427 131,448
Net book value at 1 April 2019 5,529 110,681 18,372 1,558 136,140
Net book value at 31 March 2020 21,775 141,766 22,769 1,991 188,301

The total amortisation charged in the statement of comprehensive net expenditure in respect of assets held under finance leases and hire purchase agreements was £nil.

The gross cost of intangible assets that were fully amortised but still in use is £29,146,844.

Information technology, development expenditure and websites are internally generated assets, created using a mix of staff and supplier resource.

Research and development expenditure associated with intangible asset development has been recognised as an expense in Note 3 and Note 5 and is categorised by the nature of the spend incurred.

The value of own staff capitalised within intangible assets additions amounts to £13,217,413.

All intangible assets are owned by NHS Digital.

Carrying value of material intangible assets

2019-20 Gross Book Value

£000

Net Book Value

£000

2018-19 Gross Book Value

£000

Net Book Value

£000

Digital referrals service 39,474 16,959 31,085 16,395
NHS online 20,250 16,833 10,251 9,754
Spine 2 42,550 13,195 37,324 14,881
Interoperability and architecture 12,186 12,186 7,358 7,358
Citizen identity 13,961 11,702 7,051 6,742
Corporate cloud management software 10,729 9,835 - -
NHS.UK 13,161 9,105 9,815 8,291
e-RS live service 12,869 8,422 8,883 6,784
Data Services Platform 11,477 7,748 7,986 7,028

Movement in the revaluation reserve: intangible assets

2019-20

£000

2018-19

£000

Balance at 1 April - -
Net gain on revaluation of intangible assets 8,327 -
Transfer to the general reserve (2,260) -
Balance at 31 March 6,067 -

2018-19

Cost or valuation

Software licences

£000

Information technology

£000

Development expenditure

£000

Websites

£000

Total

£000

At 1 April 2018 23,464 120,779 20,082 1,692 166,017
Additions 120 46,382 23,684 1,319 71,505
Reclassification 292 25,571 (25,394) - 469
Disposals (7,863) (1,294) - - (9,157)
At 31 March 2019 16,013 191,438 18,372 3,011 228,834
Amortisation

Software licences

£000

Information technology

£000

Development expenditure

£000

Websites

£000

Total

£000

At 1 April 2018 15,254 60,124 - 1,194 76,572
Provided during the year 2,991 21,955 - 259 25,205
Reclassification 8 - - - 8
Disposals (7,769) (1,322) - - (9,091)
At 31 March 2019 10,484 80,757 - 1,453 92,694
Net book value at 1 April 2018 8,210 60,655 20,082 498 89,445
Net book value at 31 March 2019 5,529 110,681 18,372 1,558 136,140

The total amortisation charged in the statement of comprehensive net expenditure in respect of assets held under finance leases and hire purchase agreements was £nil.

The gross cost of intangible assets that were fully amortised but still in use is £28,687,110.

Information technology, development expenditure and websites are internally generated assets, created using a mix of staff and supplier resource.*

Research and development expenditure associated with intangible asset development has been recognised as an expense in Note 3* and Note 5 and is categorised by the nature of the spend incurred.

The value of own staff capitalised within intangible assets additions amounts to £17,577,160.

All intangible assets are owned by NHS Digital.

*Text from 2018-19 accounts has been amended


Note 8: Other non-current receivables

-

31 March 2020

£000

31 March 2019

£000

Prepayments 11,296 6,103

Non-current prepayments relate to software licences and support, and extended hardware warranties.


Note 9: Trade receivables and other current assets

Amounts falling due within one year

31 March 2020

£000

31 March 2019

£000

Contract receivables invoiced 13,734 6,372
Other receivables 340 276
Value added tax 4,630 6,271
Deposits and advances - 16
Prepayments and other receivables 12,374 11,609
Contract receivables not yet invoiced 1,575 543
Other accrued income 23 9
Total trade receivables and other current assets 32,676 25,096

Note 10: Cash and cash equivalents

-

31 March 2020

£000

31 March 2019

£000

Balance at 1 April 2019 21,204 23,929
Net changes in cash and cash equivalents (1,367) (2,725)
Balance at 31 March 2020 19,837 21,204

Bank balances were held during the year with the NatWest under the Government Banking Service.


Note 11: Trade and other payables

Amounts payable within one year

31 March 2020

£000

31 March 2019

£000

Trade and other payables 8,930 12,907
Income tax, national insurance and superannuation 6,388 7,607
Contract liabilities 1,325 590
Accruals 49,990 40,830
Total trade and other payables 66,633 61,934

Note 12: Provisions for liabilities and charges

-

Dilapidations

£000

Injury benefit

£000

Termination benefits

£000

Total

£000

Balance at 1 April 2019 3,270 649 1,290 5,209
Arising during the year 592 22 63 677
Utilised during the year (48) (28) (770) (846)
Reversed unused (178) - (520) (698)
Balance at 31 March 2020 3,636 643 63 4,342
Expected timing of cash flows

Dilapidations

£000

Injury benefit

£000

Termination benefits

£000

Total

£000

Within one year - 28 63 91
One to five years 3,636 112 - 3,748
Over five years - 503 - 503

The dilapidation provision refers to the anticipated costs for remedial works at the end of property leases and is based on an assessment made by an external property advisor, or an internal assessment using industry standard estimates.

The injury benefit costs refer to an award where quarterly payments are made to the NHS Pension Scheme.

Termination benefits relate to the anticipated costs of redundancies where specific employees have been notified as ‘at risk’ but formal notice has not been provided.


Note 13: Capital commitments

Capital commitments amount to £25,507,865 (31 March 2019: £2,224,626). Of this, £3,890,897 relates to ordered IT equipment, £12,504,020 relates to fit-out costs of the new Leeds ‘hub’ and £9,112,948 relates to software licences and development work.


Note 14: Other financial commitments

NHS Digital has not entered into any non-cancellable contracts (which are not operating leases) for the provision of services as at 31 March 2020 (31 March 2019: £nil).


Note 15: Contingent assets and liabilities

During the year, an internal audit of payroll processes and procedures was undertaken. This identified that some payments of additional pay allowances had been made incorrectly. These are being investigated and quantified, and action will then be taken to recover any overpayments. As such, a contingent asset exists in respect of these overpayments, although, as investigations are ongoing, it is not yet possible to determine the value.

Contingent liabilities amount to £16,564,000 (31 March 2019: £26,000,000). £15,500,000 relates to the estimated termination benefits in relation to Wave 3 of the Org2 change programme. Wave 3 has been delayed whilst the organisation focuses on the coronavirus (COVID-19) response, and the exact timing has yet to be determined. The anticipated cost for the liability has been derived from the Wave 1 and 2 outturns, but the future liability is dependent on the assessment process, and management review of staff and skills requirements. £614,000 relates to estimated potential IR35 liabilities, and £450,000 relates to estimated potential employment related claims.


Note 16: Commitments under operating leases

Expenditure includes the following in respect of operating leases:

-

2019-20

£000

2018-19

£000

Accommodation 4,804 4,955
Other operating leases 53 70
Total 4,857 5,025

At the reporting date non-cancellable operating lease commitments were:

Land and buildings

31 March 2020

£000

31 March 2019

£000

Not later than one year 6,915 5,040
Between one and five years 19,067 20,989
Later than five years 82,784 86,820
Total land and buildings 108,766 112,849
Other leases

31 March 2020

£000

31 March 2019

£000

Not later than one year 26 36
Between one and five years 3 29
Later than five years - -
Total other leases 29 65
Total 108,795 112,914*

*Total corrected, no other figures have been amended.


Note 18: Financial instruments

As the cash requirements of NHS Digital are met through grant-in-aid by the Department of Health and Social Care, and invoiced income largely received from the Department of Health and Social Care and its related bodies, financial instruments play a more limited role in creating and managing risk than would apply to a non-public sector body. The majority of financial instruments relate to contracts to buy non-financial items in line with NHS Digital’s expected purchase and usage requirements and NHS Digital is therefore exposed to little credit, liquidity or market risk.

a) market risk

NHS Digital was not exposed to material currency risk or commodity risk. All material assets and liabilities were denominated in sterling. NHS Digital had no significant interest bearing assets or borrowings subject to variable interest rates, hence income and cash flows were largely independent of changes in market interest rates.

b) credit risk

Credit risk arises from invoices raised to customers for services provided. Most high-value receivables relate to balances with the Department of Health and Social Care and its related bodies against purchase orders and therefore do not represent a significant credit risk. NHS Digital had a comparatively small value of external receivables and therefore disclosure of the largest individual debt balances was not considered in the evaluation of overall credit risk.

Movement in the provision for expected credit losses

2019-20

£000

2018-19

£000

Balance at 1 April 6 1
Provided for in the year 32 6
Reversed unutilised (6) (1)
Amounts written-off during the year as uncollectible - -
Balance at 31 March 32 6

The provision for expected credit losses is assessed on an individual debt basis.

The table below shows the ageing analysis of trade receivables at the reporting date:

-

Current

£000

< 30 days overdue

£000

31-60 days overdue

£000

> 61 days overdue

£000

Total

£000

Balance at 31 March 2020 10,788 2,402 225 659  14,074
Balance at 31 March 2019 2,479 3,130 739 300 6,648

NHS Digital’s standard payment terms are 14 days from date of invoice. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivables mentioned above. NHS Digital did not hold any collateral as security.

c) Liquidity risk

Liquidity risk is managed through regular cash flow forecasting. NHS Digital had no external borrowings and relies on grant-in-aid from the Department of Health and Social Care for its cash requirements and was therefore not significantly exposed to liquidity risks.

The table below analyses NHS Digital’s financial liabilities that will be settled on a net basis in the period of less than one year. The carrying value of financial liabilities was not considered to differ significantly from the contractual undiscounted cash flows:

-

31 March 2020

£000

31 March 2019

£000

Current liabilities 66,633 61,934

Note 19: Events after the reporting period ended

In accordance with IAS 10, events after the reporting period are considered up to the date on which the accounts are authorised for issue.

Coronavirus (COVID-19) has had a major impact in the period from the reporting date, however there have been no adjustments made to the accounts as a result of events after the reporting date.


Note 20: Authorised date for issue

NHS Digital’s Annual Report and Accounts are laid before Parliament. IAS 10 requires NHS Digital to disclose the date on which the Annual Report and Accounts are authorised for issue.

The Accounting Officer authorised these financial statements for issue on 10 July 2020.

Last edited: 20 July 2020 3:03 pm