HMRC recently published guidance on COS and included clarification on when VAT can be recovered. This confirmed that VAT should be recovered within the financial year in which it became chargeable (subject to a three month adjustment period). VAT is incurred when it became chargeable, or where you do not have a VAT invoice, the date you receive a VAT invoice.

This caused some concern across some NHS Bodies as a result of their current ‘payment date’ based accounting. As such – HMRC have recognised the difficulties that some NHS Trusts may face in changing their system to account for VAT on a different basis, and have allowed an extension of time up to 31 March 2016 for NHS Trusts to make such changes. After this date, HMRC will expect Trusts to make claims based on when the VAT became chargeable.