HMRC have recently published updated guidance for some Contracted Out Service headings. Most of the changes are either minor clarifications or amendments to the heading titles. The current published guidance for all Contracted Out Services can be accessed here.
Whilst we eagerly await the outcome of the HM Treasury’s ‘VAT and the Public Sector: Reform to VAT Refund Rules’ paper and consultation, (in which a full-VAT refund model is to be explored) a new Treasury Directive has been released expanding the current Contracted-Out-Services (COS) direction
For a number of years HM Treasury have been considering potential reforms to the Contracted-Out-Services – numbered 1 through to 76 – which you will be familiar with from our reports. As a quick recap these rules [Section 41 VATA94] are the mechanism with which NHS and Government Departments (GD) reclaims VAT on certain outsourced services.
Another bit of good news for the NHS – the Court of Appeal has recently supported the Upper Tribunal’s previous decision that lease cars provided under a salary sacrifice are not a supply for VAT purposes (as a result of the ‘de-supply’ order – “Value Added Tax (Treatment of Transactions) Order 1992 SI 1992/630”).
As a result of the recent decision of the Upper Tribunal in the case of Northumbria Healthcare NHS Foundation Trust, there is an opportunity for any NHS bodies that were accounting for VAT by using the 50% input tax block, to reclaim this ‘blocked’ input tax.
Whilst there does not appear to have been an official announcement by them, HMRC have helpfully updated the guidance on COS Heading 14 Computer Services and COS Heading 71 Welfare Services on the online manual late last week. Whilst Heading 71 hasn’t provided much in the way of difficulties over the years, Heading 14 has certainly been an area of uncertainty for many.
HMRC have today released further clarification to be read in conjunction with the October 2015 ‘HMRC COS Guidance for government departments and NHS bodies (2nd tranche)’ document. There are not many surprises in this document, and below is a summary of the key points: