Business activities and partial exemption VAT – do you have an approved method?
NHS Trusts must account for VAT properly when generating business income outside of their core NHS activities.
Depending upon the type of income, this means accounting for VAT at the standard-rate (currently 20%), zero-rated (0%), reduced-rate (5%) or exempt from VAT.
This in turn creates opportunities to identify taxable business input tax recovery on both direct and indirect costs, but also a legal obligation to carry out a partial exemption calculation to restrict VAT recovery (in particular, on some contracted-out services type VAT) where it relates to VAT exempt business income.
HM Revenue & Customs (HMRC) has recently updated its guidance in this respect and produced a ‘VAT recovery framework’ which suggests how NHS bodies can calculate business activity and partial exemption VAT adjustments.
Although the framework itself is not mandatory, the partial exemption obligation is, which means that failure to apply a standard or special method agreed with HMRC will result in errors on VAT returns, which could in turn result in a penalties.
How can CRS VAT Consulting help?
As a leading provider of VAT advisory services to the NHS, CRS VAT Consulting has already taken steps to gain approval of special methods with HMRC for a number of clients.
The example method suggested in the framework document is more simplistic than the calculations which we have produced, so the HMRC method is likely to result in a reduced input tax claim and higher partial exemption calculation.
We can therefore write to HMRC in order to obtain formal approval of a bespoke special method to be used for NHS clients. This then results in monthly figures to be applied to your monthly VAT returns, plus an annual adjustment at the end of the year, without the need for further annual HMRC approval.
Because of our attention to detail in this area we can demonstrate a 100% success rate in improving VAT recovery for our clients and substantially reducing partial exemption liabilities. In many cases we have re-reviewed relevant periods already reviewed by previous advisers subject to the four-year cap and have agreed additional claims with HMRC.
Want to find our more?
If you have not yet had a special method agreed with HMRC, we would be delighted to hear from you. Our dedicated team of NHS VAT professionals can work with you in order to review all types of income generation, to ensure compliance and to ensure a workable recovery method is agreed.
Fees for our services are extremely competitive and it is our policy to only charge for our services where a VAT saving is achieved.