High Level of Service

HMRC update COS Heading 14 (computer services)

by Berthold Bauer on May 4, 2021

The re-wording of COS Heading 14 (computer services) has been on the horizon since June 2017 when the latest HMRC Guidance was released. HMRC have now provided an update on much anticipated re-wording on VATGPB9700 (the HMRC internal manual) that begins by explaining that once again a) and b) remain unchanged:

a) the intended general scope of the Heading has not changed, and;

b) that they are continuing discussions with representative bodies about how to further improve the guidance.

HMRC have however included two useful clarifications that are broadly in-line with expectations from their previous discussions with HFMA.

There has long been discussions around what HMRC intended “to the specification of the recipient” to include. HMRC have elaborated on this point and clarified:

  • the system could be used elsewhere if substantially adapted. We are not expecting that it is impossible to adapt the system for use elsewhere
  • a supplier identifies the needs of a government department or NHS body and engages with that body to provide a bespoke product that addresses those needs’

This helps to clarify the original ‘perceived needs’ and ‘no application outside of the NHS’ statements that caused difficulty in the application of the heading in the past.  

Whilst the HMRC update is welcomed, there continues to be areas that we feel could benefit from further re-wording to support a consistent approach between the NHS, VAT advisors and HMRC alike.

BB had interpreted the June 2017 Guidance in-line with the two clarifications HMRC have now provided and will continue to adjust VAT recovery as required for our Clients.  

Where you may have any questions on the revised COS Heading 14 Guidance, please contact your lead BB consultant or alternatively contact us here.


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