Close my Care Home Business

Rescue and closure options for care homes

When a care home enters financial difficulty, the complications can be far-reaching, impacting service users, residents, their families, care staff, management teams, and local authorities. A prolonged gap in trading due to insolvency can compromise Care Quality Commission (CQC) status, patient trust, and live contracts. If your care home is in financial difficulty, consider your options early, whether that is company rescue or closure.

What's putting UK care homes under financial pressure right now?

We are often approached by care home directors who cite similar pressures, such as discrepancies in local authority funding and rising staffing costs. The common pressures include:

• Gap between local authority funding and the cost of delivering care – If your care home relies heavily on local authority funding, it can end up running at a structural loss if you can’t raise enough funds to offset the difference.
• Rising staffing costs - Higher National Living Wage and National Insurance contributions reducing social care budgets, making staff numbers unsustainable.
• Declining occupancy - A home running at full occupancy can be profitable, while the same home running at partial capacity can be loss-making.
• CQC ratings and regulatory pressure - A poor CQC rating can deter self-funder enquiries and affect a local authority’s decision to renew a contract.

All care homes, from residential care homes, nursing care homes, to respite care homes, face unique pressures. From refinancing care homes to support expansion plans, to launching accelerated sale processes for time-sensitive care homes, to securing the sale out of liquidation for distressed care homes, our Insolvency Practitioners are experienced in a range of insolvency scenarios.

Care home insolvency is highly sensitive because continuity of care for residents must be prioritised alongside protecting the commercial position of the business or charity. Our licensed Insolvency Practitioners specialising in health and social care work closely with the CQC and relevant public authorities on most cases.

Our work involved securing a buyer for a homecare business with over 2,500 staff after a Time to Pay arrangement was refused. We successfully ensured local authority contracts continued without disrupting delivery of care to 4,000 vulnerable service users.

Another case where continuity of care was the primary focus was when we were appointed administrators of a social care provider responsible for supporting 1,500 service users across 10 local authorities. We retained essential staff until a suitable alternative service provider was secured, successfully transferring care services within six weeks of being appointed.

“Shaun really helped me for quick legal advice in a stressful situation where I needed advice QUICK. Called me back within 30 seconds and gave me the advice I needed. Thank you”

Sam

 

Contact the Real Business Rescue Team today

Shaun Barton
Business Debt Expert

What are my options if my care home is in financial difficulty?

The right option for your care home depends on whether the underlying business is viable, and how much time you have before creditors or CQC act.

• Rescue - a Company Voluntary Arrangement (CVA), a Time to Pay arrangement with HMRC, or administration, if the home has a viable future.
• Sale - selling the business and its assets as a going concern.
• Closure - a Creditors' Voluntary Liquidation (CVL), if the business can't be saved or sold.

You must seek advice from a licensed Insolvency Practitioner to determine the right route for your care home.

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Can my care home be rescued?

If your care home is in financial difficulty and operating costs are no longer sustainable, consider your rescue options. Where a care home is struggling with HMRC tax debts, a Time to Pay (TTP) arrangement is often the first thing worth exploring, giving the company additional time to bring tax arrears up to date, avoiding formal insolvency.

Where there are more creditors than HMRC, such as catering vendors, staffing agencies, or personal protective equipment (PPE) suppliers, a CVA is a payment arrangement whereby the company can make reduced monthly repayments, typically over 3 to 5 years. This can be useful for leasehold care homes to renegotiate rent with the landlord as part of the arrangement. A CVA is a realistic option if the underlying business is viable and creditors vote in favour of the CVA proposal.

If creditor pressure is severe, administration gives the company legal protection while the administrator, a licensed Insolvency Practitioner, assesses whether the business has a future. During company administration, the priority is to keep the home trading and secure continuity of care, while a rescue plan is determined. A sale of the care home may be considered if the only way the home can remain open, protect resident placements, and save staff jobs is under new ownership. A buyer needs their own CQC registration before taking over, so this route needs to be planned early.

What happens to residents and staff if my care home closes?

Closing a care home affects directors, creditors, and residents. If a Creditors’ Voluntary Liquidation is the only realistic option, your Insolvency Practitioner will consider a range of factors:

• CQC notification – The CQC must be kept informed, and registration doesn't automatically pass to a new owner if the business is sold, it must be applied for separately.
• Resident welfare and relocation - Where residents need to be transferred, this transition is usually managed with local authorities to ensure the move is controlled.
• Staff and Transfer of Undertakings (Protection of Employment) Regulations (TUPE) - If the business is sold as a going concern, staff typically transfer to the buyer under TUPE regulations. If the company closes, staff are usually made redundant.
• Local authority funding contracts – In our experience, local authorities are often the largest single creditor in a care home insolvency as they are a main funding and contract provider.

If your company enters a CVL, you may be entitled to claim director redundancy, along with unpaid wages, holiday pay, and other statutory entitlements, depending on your age, salary, and PAYE status.

How we’ve helped care homes

We were appointed to advise a small, independent residential care home in the North West of England, registered with the CQC to provide care to around 20 residents. The company had built up significant tax arrears, and after continued non-payment, HMRC issued a winding-up petition.

We were brought in after the petition had already been filed, which left very little time to act before the company's bank account was frozen. We initially explored a CVA or administration, but the tight timescale meant a Creditors' Voluntary Liquidation was the only realistic route. We were then able to sell the business and its assets out of liquidation to a new operating company. The sale meant the home stayed open, 16 residents continued living there without disruption, and all 17 staff kept their jobs.

“We became involved after the petition had already been issued, which gave us very little time. Our first attempts were to explore a CVA or administration, but the timescale and the bank freezing the account meant a Creditors' Voluntary Liquidation was the only realistic option left. Selling the business out of liquidation meant the home stayed open, the residents didn't have to move, and every member of staff kept their job.”

Shaun Barton, Partner, Real Business Rescue

How we can help

Our licensed Insolvency Practitioners have considerable experience advising care home directors, and understanding the added pressure of protecting residents, staff, and CQC status, while resolving the financial position. Whether your care home has a viable future through a CVA, Time to Pay arrangement, or administration, or the right outcome is a sale or a Creditors' Voluntary Liquidation, we'll talk you through your options. Contact our team for a free, no-obligation consultation to understand your financial position.