Accounts: 2021-22

All income and expenditure derives from continuing operations.

Notes 1 to 21 form part of these financial statements.

Notes 1 to 21 form part of these financial statements.

The financial statements on this page were approved by the Board on 12 October 2022 and signed on its behalf by: 

Simon Bolton
Interim Chief Executive
2 November 2022

Notes 1 to 21 form part of these financial statements.

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. Further information about our remit, structure and work are in the Performance Report. The address of our registered office and principal place of business is provided. We are accountable to the Secretary of State for Health and Social Care for discharging our functions, duties and powers effectively, efficiently and economically. The Department of Health and Social Care undertakes this role on the Secretary of State’s behalf on a day-to-day basis.

1.2 Basis of accounting

The financial statements have been prepared in accordance with the 2021-22 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 that 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 2021-22. 

The FReM does not require the following standards and interpretations to be applied in 2021-22: 

• IFRS 14 Regulatory Deferral Accounts - this applies to first-time adopters of International Financial Reporting Standards after 1 January 2016, and is therefore not applicable to Department of Health and Social Care group bodies
• IFRS 16 Leases - Implementation for those entities that follow the FReM has been deferred until 2022-23.  NHS Digital has undertaken a detailed review of its existing leases in preparation for the implementation of the standard from 1 April 2022. A comparison of the expected transactions and balances arising in 2022-23 from the adoption of IFRS 16 compared to the previous IAS 17 lease standard is set out on the below:

The FReM mandates the application of the practical expedient outlined in paragraph C3 of the standard in which IFRS 16 is applied to contracts that fell within the scope of IAS 17 and IFRIC 4 and not applied to those identified as not containing a lease under the previous standards. 

• IFRS 17 Insurance Contracts - this is effective for accounting periods beginning on or after 1 January 2021, but has not yet  been adopted by the 2021-22 FReM. The application of IFRS 17 would not have a material impact on the accounts for 2021-22, 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, or a purchase order is received from the customer. 

Income is recognised in proportion to the fulfilment 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 analyses are supplied, or by the passage of time as the service is delivered, or as time and material costs are incurred, or by the fulfilment 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, or for non-invoiced income when payment is received, 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 Transfer of functions

As public sector bodies within a departmental boundary are deemed to operate under common control, business reconfigurations are outside the scope of IFRS 3 Business Combinations. When functions transfer between 2 public sector bodies the FReM requires the application of ‘absorption accounting’. Absorption accounting requires that entities account for their transactions in the period in which those transactions took place. Where assets and liabilities transfer, the gain or loss resulting is recognised in the Statement of Comprehensive Net Expenditure, and is disclosed separately from operating costs.

On 1 October 2021, the National Disease Registration Service (NDRS) transferred from Public Health England to NHS Digital. 329 staff transferred to NHS Digital, together with net assets of £1,110,000. Revenue expenditure for NDRS from the date of transfer to the end of the financial year was £9,278,000, and capital expenditure was £358,000.

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 1 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, have 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 1 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 set up 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
• an intention to complete the intangible asset and use it
• an 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 they are 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 that 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. 

Assets are assessed 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 potential efficiency factors or, where the asset is material and non-standard circumstances apply, by an external professional valuation. All assets have been revalued in the year, except software licences. Indexation had previously been applied to software licences up to 31 March 2019. Indexation has not been applied to software licences from 1 April 2019. After that date, software licences have been held at depreciated historical cost, on the basis that they are short-life assets and, as such, depreciated historical cost is considered a suitable proxy for current value in existing use. 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 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 5 years or the estimated life of the asset where this is known to be different. 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:

• fixtures and fittings: 1–18 years
• office equipment and information technology: 1–10 years

The estimated useful lives and residual values are reviewed annually.

d. Depreciated replacement cost

Assets that are held for their service potential, and are in use, are held at their current value in existing use. For non-specialised assets, this is interpreted as market value in existing use, defined in the Royal Institution of Chartered Surveyors (RICS) Red Book as Existing Use Value (EUV). For specialised assets, this is interpreted as depreciated replacement cost on a modern equivalent asset basis. 

e. Impairment

A revaluation decrease that does not result from a loss of economic value or service potential is recognised as an impairment charged to the revaluation reserve to the extent that there is a balance on the reserve for the asset being impaired and, thereafter, to expenditure. Impairment losses that arise from a clear consumption of economic benefit are taken to expenditure. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of the recoverable amount but capped at the amount that would have been determined had there been no initial impairment loss. The reversal of the impairment loss is credited to expenditure to the extent of the decrease previously charged there, and thereafter to the revaluation reserve.

1.8 Research and development 

Expenditure incurred on pure and applied research is treated as an operating expense in the year in which it is incurred. Development expenditure is for the development of specific business systems. Expenditure that does not meet the criteria for capitalisation is treated as an operating expense in the year in which it is incurred. Development expenditure meeting the criteria for capitalisation is treated as an intangible asset under construction until 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 Department of Health and Social Care Group Accounting Manual. 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: 

Dilapidations provision

NHS Digital has provided £5.4 million in respect of anticipated dilapidation costs of its leased accommodation across its estate where required. Management has used either external property advisors or information provided by the Department of Health and Social Care property directorate to assess likely liabilities at the end of the leases. 

Employment taxes

An accrual of £0.6m for penalties in respect of IR35 has been included in the year-end position, to cover the period from April 2017 to the end of March 2022. At the end of June 2022 HMRC concluded its IR35 investigation, with no further IR35 liabilities arising. Penalties were suspended for 3 months, conditional on upskilling hiring managers, a 100% double-check of any out-of-scope determinations, and on-time filing of all tax-related returns.

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 to identify any impairments or disposals required, and to confirm the likely asset life over which these systems should be amortised. 

Our most material asset remains the National Coronavirus Testing System. This supports the end-to-end testing journey, from booking a test at a test centre, or ordering test kits for home delivery, to the operation of test centres, and the dissemination of results both to the individual and for data analysis and reporting. During the year we added additional functionality to cater for international arrivals, data feeds to the NHS App for the COVID Pass, a digital reader to support the upload of lateral flow test results and changes to support the response to the Omicron variant. We also increased the capabilities for the bulk registration of tests, increased the speed of data flows, improved the monitoring for variants of concern, and continued to cater for the specific requirements of each of the Devolved Administrations. The system continued to be developed as requirements evolved in response to the pandemic, and the very unusual and challenging circumstances affected the way the National Coronavirus Testing System was built. The requirements had to be met extremely urgently, with more than 1,000 software releases during the year in response to changing policy. The system has continued to be effective and reliable.

Accounting standards required us to produce a valuation for the balance sheet based on the cost of replacing the asset as at 31 March 2022. The assumptions used to produce the replacement valuation include perfect hindsight about lessons learned in initially building the asset. Also, the value at 31 March 2022 was reduced to reflect the fact that it had been used over the preceding 2 years. To ensure independence, we were required to commission an external expert valuation. As is common with reports of this nature, the valuation of the system was expressed as being within a range. We assessed this range, using our experience of the software development market, and determined that the higher end of the range best represented the public sector position on both risk and retaining skilled roles within the United Kingdom, with lower levels of offshoring of development work than might be seen in the private sector.

Using the higher end of the range, adjusted for the use of the asset up to 31 March 2022, we estimate that, as at 31 March 2022, the value would have been £40.2 million lower than the value of the asset held on our balance sheet, and, as required by accounting standards, we have impaired the asset by this amount.

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 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 interest rate or 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 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 financial statements have been prepared on a going concern basis. Funding for 2022-23 is in place, and the continuation of the provision of services is demonstrated through the plans agreed with our delivery partners.

On 22 November 2021 the Secretary of State for Health and Social Care announced that NHS Digital would be merged into NHS England. The functions carried out by NHS Digital will transfer in their entirety to NHS England, and will continue to be delivered, and therefore, in accordance with the Department of Health and Social Care Group Accounting Manual, the going concern basis for preparing the financial statements remains appropriate. 

IFRS 8 requires operating segments to be identified 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 (£19.1 million), and the Department of Health and Social Care (£5.1 million). The income derived from outside the UK is immaterial.

For the year ended 31 March 2022

The reallocation of central costs attributes central overheads to programmes and services. 

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. 

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.

IT Operations

Responsible for the reliable, performant and secure operation of all live systems and services that we operate for the health and care system. 

Cyber Operations

Provides trusted operational capability, ensuring that the health and social care system is resilient to cyber attacks, protecting individuals and technological advances in care. 

Platforms 

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 services and product development.

Product Delivery

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

COVID-19 delivery

Spend relates to delivery during the pandemic. 

For the year ended 31 March 2021

There were no amounts spent on staff benefits during the year and there were 2 (2020-21: 7) early retirements on the grounds of ill health. The costs of ill-health retirements are met by the NHS Pension Scheme

Income analysed by classification and activity is as follows:

Income from programme and service delivery covers programme, project and service management, system support, hosting, training and helpdesk services. 

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.

‘Sale of goods’ relates to the purchase and resale of IT hardware at cost to other NHS bodies as part of the COVID-19 response.

Grant income received in year related to the National Core Study aimed at accelerating research on COVID-19, a digital innovation hub focussing on supporting the improved planning and delivery of clinical trials in the UK, and the ECHILD project, which is studying how disruptions to services during
the national lockdowns affected children’s health and education.

Fees and charges relate to data services and are detailed in this report. 

£1,368,036 of income was included in contract liabilities at 31 March 2021 and £956,176 of this has been recognised in 2021-22, and £21,408 has been credited. The balance relates to future periods.

Payment terms are 30 days, except for purchases made online via our eStore where payment is due at the time of ordering.

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

2021-22

The total depreciation charged in the statement of comprehensive net expenditure in respect of assets held under finance leases and hire purchase contracts was £1,277,346. All tangible assets are owned by NHS Digital, except computer hardware with a net book value of £1,123,808, accounted for as a finance lease in accordance with IFRIC 4 and paid in full at the outset. 

The gross cost of property, plant and equipment that has been fully depreciated but is still in use reduced from £26,667,123 at 31 March 2021 to £6,116,113 at 31 March 2022 due to a detailed review of asset lives.

Transfers in under absorption accounting were in respect of the National Disease Registration Service, which transferred to NHS Digital from Public Health England on 1 October 2021.

Movement in the revaluation reserve: property, plant and equipment

The total depreciation charges in the statement of comprehensive net expenditure in respect of assets held under finance leases and hire purchase contracts was £766,181.

All tangible assets are owned by NHS Digital, except computer hardware with a net book value of £2,096,807 held under a finance lease. There were no finance lease liabilities outstanding at 31 March 2021.

The gross cost of property, plant and equipment that has been fully depreciated but is still in use is £26,667,123.

The freehold building was independently valued in March 2021 by the Government Property Agency immediately prior to transfer.

The total amortisation charged on the statement of comprehensive net expenditure in respect of assets held under finance leases and hire purchase agreements was £nil. All intangible assets are owned by NHS Digital.

The gross cost of intangible assets that were fully amortised but still in use is £18,029,717. Information technology, development expenditure and websites are internally generated assets, created using a mix of staff and supplier resources. The value of own staff capitalised within intangible asset additions amounts to £16,339,501.

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.

Transfers in under absorption accounting were in respect of the National Disease Registration Service, which transferred to NHS Digital from Public Health England on 1 October 2021.

Carrying value of material intangible assets

n/a indicates asset is still under construction.

Material intangible assets, ranked by current year net book value. The descriptions of 2 of the assets have been updated since the previous year to better describe their function. 'NHS Online' now appears in the table as 'NHS App' and 'Citizen Identity' now appears as 'NHS login'.

Movement in the revaluation reserve: intangible assets

The total amortisation charged on the statement of comprehensive net expenditure in respect of assets held under finance leases and hire purchase agreements was £nil. All intangible assets are owned by NHS Digital.

The gross cost of intangible assets that were fully amortised but still in use is £16,560,106. Information technology, development expenditure and websites are internally generated assets, created using a mix of staff and supplier resources. The value of own staff capitalised within intangible asset additions amounts to £12,413,000.

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.
Assets with a value of £7,304,528 were transferred in from the Department of Health and Social Care (DHSC) in July 2020, and assets with a value of £1,581,70 were transferred back to DHSC in September 2020.

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

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

The dilapidations 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.

Capital commitments amount to £587,717 (31 March 2021: £512,551). Of this £390,069 relates to ordered IT equipment and £197,648 relates to software licences and development work.

NHS Digital has not entered into any non-cancellable contracts (which are not operating leases) for the provision of services as at 31 March 2022 (31 March 2021: £nil).

Contingent liabilities amount to £57,000 (31 March 2021: £175,000) and relates to estimated potential employment-related claims.

Expenditure includes the following in respect of operating leases:

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

In 2020-21, the Leeds Government Hub commitments were calculated based on an end date of 4 October 2040. However, the final signed Memorandum of Terms of Occupation (MOTO) confirmed the first break option is 4 August 2039. This has led to a reduction in the total lease liability over the contract term of £4,604k. Therefore the lease liability later than 5 years should have been £52,659k.

The numbers for 2020-21 have been represented to add clarity and transparency for reporting. Whilst the ending balance is unchanged the lease incentive received and utilisation of the lease incentive have been presented as individual components in both the above table and in the Statement of Cash Flows.

The Health and Social Care Information Centre, also known as NHS Digital, is an executive non-departmental public body created by the Health and Social Care Act 2012. It is sponsored by the Department of Health and Social Care (DHSC), and DHSC, together with its associated bodies, are therefore regarded as related parties. During the year, NHS Digital had the following transactions with DHSC group bodies: income £32.1 million (2020-21: £35.9 million) and expenditure of £4.6 million (2020-21: £9.3 million), and, at 31 March 2022, had the following balances with DHSC group bodies: £12.2 million receivables (2020-21: £11.3 million) and £3.4 million payables (2020-21: £1.1 million). The major customers within the group were the DHSC, NHS England and Public Health England (latterly, known as the UK Heath Security Agency). The majority of expenditure related to transactions with the Department of Health and Social Care. 

In addition, NHS Digital has had a number of transactions with other government departments and other central and local government bodies. In order to reduce the volume of detailed disclosures, IAS 24 does not require the disclosure of transactions between bodies under the control of the same government. 

No special terms and conditions were applicable to transactions with related parties. No guarantees or security were accepted or given. All transactions were or will be settled in cash. No provisions were made for doubtful debts in respect of these transactions. The bad debt expense in the year relating to related parties amounted to: £nil (2020-21: £nil).

In addition, at 31 March 2022, there were capital commitments of £nil (2020-21: £47,722) with Accenture (UK) Ltd.

No other related party transactions were noted with key management, other than remuneration and expenses as disclosed in the remuneration report.

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

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:

NHS Digital’s standard payment terms are 30 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 1 year. The carrying value of financial liabilities was not considered to differ significantly from the contractual undiscounted cash flows:

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

Since the reporting year end, it has been announced that the effective date of the merger with NHS England, will be effective from early January 2023.

There are no other events on which to report. 

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 4 November 2022.