A dispute between University College London Hospitals foundation trust and the Department of Health has fuelled fears that the government will claw back surpluses from foundation trusts.

The DoH and UCLH confirmed they have been having 'discussions' over the hospital's capital allocation and investment programme, which is complicated by a private finance initiative scheme that has a full business case running to 22 volumes.

The issue was discussed at last month's Monitor board meeting after foundations raised concerns that surpluses deemed as 'excess' could be 'subject to a "special" dividend payment' to the DoH.

Last year UCLH made£110m on the sale of a redundant central London site, which helped it swing from a£36m deficit to an£11m surplus. This prompted fears the DoH would make 'back-door clawbacks' of the windfall by withholding£7.5m of previously pledged capital funding.

A spokesman for UCLH told HSJ the trust was 'satisfied' after its talks with the DoH over when it would get the£7.5m. 'We have agreed that we will draw on the allocation for this financial year at a mutually agreed time,' he said.

HSJ understands that although UCLH has been allowed to keep its capital allocation, the government was keen to ensure it did not draw the cash before it needed to be spent. That would embarrass the Treasury as UCLH would earn interest at its expense. Last year it earned£5.1m on its banked cash.

A senior source told HSJ it exposed the problems with the present capital funding regime for foundations. Ideally, capital investment costs would be included in the payment by results tariff, but that was not simple because not all trusts invested at the same rate. Hospitals with PFI schemes also have significantly higher interest payments.

The DoH has said the current capital allocation system for trusts will end this financial year and be replaced by a system of interest-bearing loans, but no details about these have been published.

Earlier this month, director general of NHS finance, performance and operations David Flory admitted there was 'a concern' over capital funding for hospitals. 'We haven't got is a clear investment strategy for capital,' he said.