In our last newsletter, we advised that the scope of VAT recovery under this COS heading is likely to be changing.

It has always been common practice for NHS bodies to recover VAT on supplies of admin and clerical agency staff under COS heading 69.

We now understand that HMRC plan to revise this interpretation and apply the guidance notes for Government departments to the NHS from a prospective date.

The Government department guidance states the following:

  1. Typing secretarial, telephonist and clerical services including agency staff


  • VAT incurred on supplies by agencies providing typing, secretarial, telephonist and clerical services using their own staff
  • Provision of typing services by a word processing bureau


  • Secondees
  • Employee expenses

If agency staff are utilised because of difficulties in recruiting staff to fill permanent posts or are brought in to supplement existing staff levels during busy periods then these would not satisfy the criterion of being a contracted out service for these purposes and consequently any VAT incurred would not be recoverable.

This completely removes the ability to recover VAT on admin/clerical agency staff, allowing VAT recovery on admin/clerical ‘services’ only. The wording ‘including agency staff’ now seems completely obsolete, which makes its inclusion in the Treasury Direction since 1997 something of a mystery.

NHS bodies would therefore be well advised to review the current levels of VAT recovery under COS heading 69 with a view to including this in future budgets.