HM Revenue & Customs have this week released various updates that could affect our NHS Clients, these are summarised in the sections below.

Partial Exemption and Capital Goods Scheme adjustments

HMRC have released a policy brief detailing how organisations who have been adversely affected by the Covid 19 Coronavirus Pandemic can apply for a temporary alteration to both their agreed Partial Exemption Special Method (PESM) or Capital Goods Scheme adjustments (CGS). This would apply where the pandemic has affected their usual business practices in such a way that their normal PESM or CGS would not result in a fair and reasonable result. The full brief can be found here.

Partial Exemption

• Likely only to affect a Trust where PESM specific taxable or exempt income streams have greatly reduced or increased due to Covid 19.
• Approval to change a PESM is required from HMRC, they will operate an accelerated approval process in light of the current pandemic situation.
• Any HMRC approval will last for one tax year, and a new request will need to be submitted to continue the change into a further tax year.

Capital Goods Scheme

• Will only affect Trusts who are required to make CGS adjustments – this relates to single purchases of land and buildings over £250,000 or computer equipment/software over £50,000, where the items are used for both business and non-business use.
• It is only required where the CGS item’s use or income stream has drastically changed because of the pandemic.
• The same accelerated approval process will apply as with the PESMs.

VAT and the Public Sector

This deals with possible reforms to the Contracted Out Service rules, currently used by the NHS to reclaim non-business VAT expenditure where eligible. HMRC have confirmed that following the release of the policy paper, and subsequent discussions with relevant parties, they will release details of responses to this before the summer. This is potentially a very important subject for the NHS, and we will inform our Clients immediately of any changes to the current rules once confirmed by HMRC.

Simplification of the Land and Property VAT rules

HMRC have confirmed that they will shortly be asking for evidence and examples of how the current VAT Land and Property exemption is being used, to help them make the current exemption rules simpler and clearer. This may affect any NHS organisation that either leases properties or sub-let parts of their own estate to a third-party.

If you have any questions regarding any of the above information, please contact your Berthold Bauer consultant via the normal channels, or alternatively contact us here