In our October 2013 newsletter, we reported that HMRC is undertaking an investigation in to a number of VAT schemes used by NHS Trusts, which involve the hire of locum doctors and other staff on short-term employment contracts that fall outside the scope of VAT.
HMRC’s Director-General for Business Tax, Jim Harra, has confirmed that this review is still in progress, but that by the end of the current financial year, HMRC will have ‘(tackled) cases that we believe are not operating VAT correctly’.
In his evidence before a recent hearing of Parliament’s Public Accounts Committee, Mr. Harra stated that HMRC has concerns about how these schemes work in practice, and that, where a locum becomes an employee of the NHS, it has to take on the responsibilities of an employer.
Responding to a question from the Committee’s Chair, Margaret Hodge, about one type of scheme, Mr. Harra noted that in some instances, employment contracts could last as little as a day. He went on to state that this was ‘clearly not how the scheme was described to us’, and that it was ‘not the basis on which we originally gave our view about its VAT treatment’. In light of this, HMRC would ‘reserve our right to challenge’ the VAT treatment being applied, following the conclusion of its investigation.
The transcript of the hearing is now available on the Public Accounts Committee website, and we would also be happy to provide a copy, if preferred. We will of course keep you updated as HMRC’s investigation progresses.