HMRC are continuing a programme of ‘aspect checks’ on NHS Trusts, whereby a visit is arranged to review a specific area of VAT compliance. One of the areas being checked is whether NHS Trusts are applying the correct VAT treatment to purchases of non-UK goods and services.

Many of these goods and services are subject to VAT in the country of the recipient rather than the supplier, and where a foreign supplier does not have a UK VAT registration, the customer (i.e. the Trust) will have to account for UK VAT on the sterling value of these supplies.

For goods and services bought from elsewhere in the EU, NHS Trusts must self-account for output VAT at the appropriate rate. However, they may also be entitled to recover the same amount as input VAT, if the goods or services relate to a taxable trading activity, or fall under one of the contracted-out services (‘COS’) headings. This rule also applies to services bought from a non-EU supplier, whilst goods bought from outside the EU are subject to VAT on importation (although this will usually form part of the carriage or delivery charge).

NHS Trusts should therefore check that output VAT is being correctly accounted for on foreign purchases of goods and services, and correct any errors where necessary.