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NHS Bodies: Changes to VAT return submissions from April 2024 – Frequently Asked Questions

by Berthold Bauer on February 14, 2024

A worrying number of NHS Finance teams are either unaware, or unprepared for the upcoming changes to NHS bodies’ VAT return submissions, which take effect from 1 April 2024 – less than seven weeks’ time. 

Our article discusses HM Revenue & Customs’ (‘HMRC’) Statement of Practice (SoP) but below, Joe Watts – Head of NHS VAT Team at BBVAT answers some of the most frequent queries our team have received from impacted clients.

 

“What do I need to do?”

  • Ensure you have a copy of your Partial Exemption Special Method approval letter from HMRC.
  • Identify which sectors require a provisional recovery applied to them.
  • Put a solution in place which will conduct this monthly calculation from 1st April 2024.

 

“My provisional recovery amount is small; can I continue dealing with this on an annual basis?”

Regardless of the values involved, HMRC recognises the current practice is not in line with Partial Exemption guidance and legislation. Therefore, from 1 April 2024 carrying out the calculation annually will no longer be accepted.  Failure to comply with the new rules puts NHS bodies at risk of challenge and potential penalties for knowingly submitting incorrect data to HMRC.

 

“Does this apply to all NHS bodies or just acute Trusts, for example?”

The Statement of Practice applies to taxable persons who undertake both business and non-business activities and who are also partly exempt for VAT purposes. It therefore applies to all NHS bodies who receive any form of business income (e.g. private patient income, catering, car parking, etc).

 

“My current VAT adviser will be sorting it… won’t they?”

This new procedure will require a significant amount of time and effort to complete monthly and is in addition to the periodic COS reviews that are undertaken. Whilst your current adviser may offer to assist with this process, it may fall outside of their existing remit, and will likely come at an additional cost.  We strongly recommend NHS bodies confirm whether their current advisers will be undertaking the additional calculations, or whether an alternative solution needs to be found.

 

“I use a back-office provider who prepares the VAT returns, will they also be doing this?”

Do not assume this – and note that it is the responsibility of a partly exempt person to take all reasonable care in ensuring the accuracy of the Partial Exemption calculations they give to HMRC. If a Partial Exemption error is made, HMRC must consider the error in line with the ‘behavioural penalties’ legislation.  Again, we strongly recommend NHS bodies confirm whether their current advisers will be undertaking the additional calculations, or whether an alternative solution needs to be found.

 

“Is the in-year provisional recovery as straight-forward as applying the provisional restriction for residual COS VAT (PE restriction %)?”

If your organisation has a Partial Exemption Special Method, it is likely that the method has several separate sectors and therefore the relevant provisional recovery rate will apply to each sector, which makes this calculation more complex.  In most cases, NHS bodies will need a separate, bespoke template to be able to undertake the monthly calculation – and with seven weeks to go before the changes take effect – are running out of time.

 

“I’m still not sure what to do, where do I go from here?”

We will be holding another free of charge webinar on this topic in March for NHS bodies who have yet to put a process in place. Should you or any members of your finance team wish to attend, please register below, or see our invite for further information: BBVAT Webinar Wednesday March 6th 2024 at 10am

 

In the meantime, should you have any further questions about the SoP or any other area of VAT, please contact our free helpline

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Berthold BauerNHS Bodies: Changes to VAT return submissions from April 2024 – Frequently Asked Questions

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