The list of eligible contracted-out services published in December 2002 is currently being reviewed by HM Treasury.  No conclusions from the review have yet been published but we understand that VAT recovery in relation to professional services is due to be changed.

The perception is that the current heading 52 on the list relating to professional services is too widely drawn, resulting in NHS organisations recovering VAT on a range of services not originally intended by Treasury.  The recent ‘clarification’ regarding VAT recovery on doctors/locums fees is an example of this.

The changes will no doubt be designed to clarify the heading further which will have the effect of limiting the scope for VAT recovery.

We will provide a further update on this once the results of the review have been announced.