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September 2007
NHS VAT NEWS BULLETIN
Contracted-out services ("COS") VAT recovery – agency staff and associated issues
NHS bodies have historically recovered VAT on all agency staff with the full knowledge of HMRC, however as outlined in our previous news bulletins, they have endeavoured over the last few years to clarify and also restrict the COS headings relating to these types of supplies.
There is often confusion as to whether NHS bodies are being provided with ‘agency staff’ or ‘services’ and therefore whether the VAT on certain supplies can be recovered under the COS rules.
For the avoidance of doubt and to also correct misleading advice which you
may have received from elsewhere, we have also obtained definitive guidance
from HMRC on this matter and can confirm that the following is correct:
- VAT on nursing services and nursing staff either provided by a nursing
principal or nursing agency can be recovered under COS heading 41. This includes
all qualified nursing staff grades.
- VAT cannot be recovered under any COS heading on the services of any
other non-nursing healthcare workers or other non-nursing healthcare staff
provided by an agency, such as doctors/locums/consultants, social workers,
physiotherapists, laboratory or theatre technicians, radiographers, etc.
- VAT on office staff can generally be recovered under COS heading 69.
This has not changed, the wording of the COS heading ‘including agency staff’ has
been incorrectly interpreted in the past to mean all agency staff. HMRC
have confirmed that this is somewhat misleading and should only really include
office staff. The heading includes typists, secretaries, telephonists, clerical
admin staff, accounts staff such as accounts payable, credit control staff,
etc, IT staff such as data inputting, data analysis, uploading PC programs,
etc (basically general day-to-day admin, clerical, accounts and IT office
duties). If an employment agency provides senior accountancy staff or senior
IT consulting staff, this is not eligible under any COS heading.
- VAT cannot be recovered under any COS heading on supplies of any
other agency staff. Services such as catering, laboratory, laundry, library,
messengers, porters, collection, delivery, passenger transport, pest control,
security, etc. continue to be eligible under the various headings as contracted-out
services in their own right, agency staff carrying out these functions are
not eligible for recovery.
- VAT on accountancy services such as record keeping, book keeping, financial
control, credit control, preparation of financial accounts, accountancy
advice, internal audit, etc can be recovered under COS heading 1. This does
not include agency staff.
- VAT on IT consultancy services can continue to be recovered under COS
heading 52. If an agency provides IT consultancy staff, HMRC have recently
clarified that this is not eligible for VAT recovery.
- Services of managers, advisers, experts, specialists, consultants, etc
can continue to be recovered under COS heading 52. This is generally accepted
to mean where a company or other form of trading body such as a sole proprietor,
partnerships, LLP, etc, provides their services. This includes services
of solicitors, architects, quantity surveyors, other professional advisers,
etc. Again, it does not include agency staff.
If you are a client of CRS VAT Consulting, fees for our services are fully
inclusive of unlimited access to our team for general VAT advice. In our experience,
we are able to answer the majority of VAT queries immediately (i.e. if you
telephone us) or within half-an-hour of the call. We aim to confirm all
queries via email or, if required, by letter. You can also submit queries
via email, in writing or via our technical queries
web page here.
Of course, if a query is going to be more complex and can’t just be
answered in this way, then we would recommend it being treated as an ad-hoc
consultancy assignment and if appropriate, we would agree any fees with you
before proceeding any further.
If you or your colleagues would benefit from receiving this
bulletin electronically, please email us info@crsvat.com and
we will gladly include you and/or them on our mailing list.
This newsletter is designed to keep readers up to date with current vat developments but is not intended to be a comprehensive statement of law. No liability is accepted for the opinions it contains or for any errors or omissions.
T: 01322 554053 F: 01322 559981 E: info@crsvat.com
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