It’s been four months since CRS VAT joined forces with PSTAX and S3TAX within the Opto Group, and we are excited to share the progress and growth we’ve experienced together. Our strategic partnership signifies a new chapter for CRS VAT while strengthening our commitment to delivering market-leading VAT and, now, Employment Taxes, consultancy to the NHS bodies.
As we continue this journey, we are thrilled to unveil our rebrand as part of the Opto Group. This fresh new look reflects our unified approach, deeper expertise, and commitment to innovation across public sector taxation. Our clients can now enjoy the same exceptional VAT services they trust but with enhanced access to a broader range of public sector tax solutions under the Opto Group umbrella.
Enhanced Public Sector Tax Services
The integration has already proven to be a significant milestone, enhancing our ability to offer comprehensive VAT services. Here’s how the partnership has been delivering for our clients:
- Comprehensive Expertise: Combining the unmatched VAT knowledge of CRS VAT with the expertise of PSTAX and S3TAX means our clients benefit from the most comprehensive, proactive tax solutions available in the market.
- NHS Focused: CRS VAT’s longstanding commitment to the NHS remains unchanged. With this rebrand, NHS clients can now access broader services across VAT reviews, Business Activities & Partial Exemption, Technical VAT support, and training – all designed to maximise VAT recovery and ensure compliance.
- Unified Support for Collaborative Projects: Our integration creates a single provider for public sector bodies under sections 33 and 41, offering seamless tax advisory and consultancy services. Whether working with local authorities or the NHS, our unified team is here to support your collaborative initiatives with trusted, specialised expertise.
- Continued Innovation: Alongside our rebrand, we remain focused on using cutting-edge technology to uncover VAT savings and streamline processes, aligning with our commitment to delivering top-tier services.
Our Rebrand – A Reflection of Growth
As we rebrand under the Opto Group, our new visual identity symbolises this exciting chapter of growth and innovation. This fresh, cohesive look underscores our unwavering commitment to providing unparalleled VAT and Employment Tax consultancy while continuing to prioritise our NHS clients’ financial well-being.
Looking Ahead
Our first four months as part of the Opto Group have been filled with achievements, and the new branding marks a continued commitment to growth. CRS VAT, together with PSTAX and S3TAX, will remain dedicated to maximising VAT recoveries, ensuring Employment Tax compliance, delivering specialised training, and ensuring that public funds are optimised. We look forward to continuing this journey with you and exploring new opportunities to serve our clients.
HMRC has introduced new penalties for late submission of VAT returns and late payment of VAT for periods starting 1 January 2023. For NHS organisations which submit monthly VAT returns, the new penalty regime applies from the January 2023 VAT return due on or before 7th March 2023.
The new late return penalty
The new late return penalty works on a ‘points-based’ system. For each VAT return you submit late, you’ll receive a penalty point until you reach the penalty point threshold. There are various point thresholds and period conditions which apply depending upon your accounting period, so we have outlined below only those which apply to NHS organisations which submit monthly VAT returns. The late return penalty will apply even on net repayment returns, where money is due from HMRC.
The penalty point threshold is 5 for NHS organisations.
If you reach the 5-point threshold, you’ll receive a £200 penalty. You’ll also receive a further £200 penalty for each subsequent late return while you’re at the threshold. If you have not reached the threshold, each individual penalty point will expire automatically on the last day of the 24th month after the date on which the late return was due. However, once you’ve reached the threshold, there are conditions which need to be met to remove the points to avoid further £200 penalties.
These are:
Condition A – complete a period of compliance For NHS organisations, you’ll need to submit 6 monthly VAT returns on time starting from the monthly period after the late return was due.
Condition B – Submit all outstanding returns You will also need to submit any outstanding returns for the previous 24 months. The 24 months will include the period of compliance.
Penalty points will be reset to zero on the first day where both condition A and condition B are met. You can check penalty points in your online account, and it will also be possible to appeal a point or financial penalty.
The new late payment penalties
The new late payment penalties apply to any payments of VAT not paid in full by the relevant due date and will be charged at different rates based on when payment is received. This means the penalties increase proportionate to the length of time a payment is outstanding – the sooner you pay, the lower the penalty.
Late payment penalties apply to VAT due:
- On VAT returns
- Following an amendment to a return or correction
- From a VAT assessment issued by HMRC when you did not submit your return
- From a VAT assessment issued by HMRC for another reason
You’ll get a first late payment penalty if your payment is 16 or more days overdue. When your payment is 31 or more days overdue, your first late payment penalty increases, and you get a second late payment penalty.
The escalation of penalties can be summarised as follows:
- Payment up to 15 days overdue – none
- Payment between 16 and 30 days overdue – 2% of the VAT you owe at day 15
- Payment 31 days or more overdue – a further 2% of what was outstanding at day 15, plus 2% of what is still outstanding at day 30, plus a daily rate of 4% per year on the outstanding balance, charged every day from day 31 until the outstanding balance is paid in full
Late payment interest
As well as the potential late payment penalties, late payment interest will also be charged from the first day that the payment is overdue until the day it’s paid in full, calculated at the Bank of England base rate plus 2.5%.
This includes amounts overdue on:
- VAT returns
- Amendments or corrections of a return
- A VAT assessment made by HMRC
- A missed VAT payment on account
Interest will also be charged on the value of penalties if these are overdue including late submission penalties and late payment penalties.
What this means to the NHS
The late return penalty will apply even on net repayment returns, where money is due from HMRC.
Given that NHS organisations submit monthly VAT returns, usually with COS VAT repayments, (as opposed to quarterly returns for most VAT payment businesses), NHS organisations are arguably more exposed to the new penalty regime than most commercial organisations.
If an NHS organisation owes VAT to HMRC on either a return (such as an end-of-year partial exemption adjustment) or on an assessment of any kind, it is crucial that the VAT is paid on time in order to avoid a penalty and interest charge.
Please contact us at the earliest opportunity if you wish to discuss how these changes may affect your NHS organisation.
Gloucestershire Hospitals NHS Foundation Trust has successfully argued through judicial review in the Upper Tribunal against HMRC’s decision to block contracted-out services (COS) VAT recovery on elements of a managed healthcare facilities contract. The findings of this case could lead to increased VAT recovery on current and future contracts for other NHS bodies and an opportunity to submit retrospective claims for VAT.
Background
The Trust had contracted with a supplier, Genmed, under a single agreement for the management of operating theatre facilities.
The contract included:
• Services, consisting of maintenance, sterilisation, data analytics, training, stock contract and management.
• Goods, consisting of structural items such as furniture and plant, and re-usable medical equipment such as ventilators and microscopes.
• Consumables, consisting of single-use items such as sutures and bandages, and prostheses, such as hip and knee joints all of which are used and provided to patients during surgery.
The consumables made up around 70% of Genmed’s contract charge. The Trust had sought HMRC’s agreement to recover the VAT under COS heading 45, Operation of hospitals, health care establishments and health care facilities and the provision of any related services. HMRC agreed that the Trust could recover VAT on the services and goods, but refused VAT recovery on the consumables on the grounds that these were a separate supply of goods not closely related to the supply of the services.
The decision
The Trust was granted permission for judicial review challenging the lawfulness of HMRC’s decision, arguing that all the component parts of fully managed theatre facilities, including consumables, are integral to each other and indispensable to the achievement of the Trust’s aims. Therefore, the Trust argued there was a single supply made by Genmed, and VAT was recoverable on the whole agreement.
After reviewing both the Trust’s and HMRC’s arguments, the Tribunal agreed with the Trust. It stated that on an objective basis and from the point of view of a typical consumer, the supply by Genmed of the services and consumables are so closely linked that they form a single composite supply, being a fully managed theatre facility, that it would be artificial to split. The Tribunal then stated that the single supply of services falls under COS 45, therefore HMRC’s decision to refuse a VAT refund was unlawful.
How does this affect NHS organisations?
COS VAT recovery is generally limited to the financial year, subject to a 3-month adjustment period. However, where HMRC has instructed an NHS body that it cannot claim COS VAT on a particular supply and this turns out to be incorrect, the four-year time limit applies.
Therefore, if your NHS organisation has entered into a similar contract to the one highlighted in this case and has either been refused or assessed for VAT recovery by HMRC, you may be able to make a claim. There may also be the opportunity to review current and future contracts for VAT recovery in light of this case. This case also highlighted that HMRC has ‘limited power’ to interpret, narrow or extend the right to VAT recovery under COS. This means that many more refusals or assessments by HMRC in respect of COS VAT could be open to challenge.
Please contact us at the earliest opportunity if this affects your NHS organisation.
Yesterday the Chancellor of the Exchequer, Rishi Sunak, announced specific VAT cuts to help the hospitality sector across the UK recover from the effects of lockdown. Whilst these measures have been brought in principally to support the high street they nonetheless also apply to hospitality services provided by public bodies, including the NHS.
From 15 July 2020 until 12 January 2021, the reduced rate of VAT (5%) will apply to supplies, across the UK, of:
• food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises
• accommodation and admission to attractions
Temporary VAT cut for supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises
HMRC has published amended VAT Notices detailing supplies to which the temporary reduced VAT rate would apply and confirmed that supplies in the course of catering shall be subject to the temporary 5% reduced rate of VAT, including:
• Hot and cold food for consumption on the premises on which they are supplied
• Hot and cold non-alcoholic beverages for consumption on the premises on which they are supplied
• Hot takeaway food for consumption off the premises on which they are supplied
• Hot takeaway non-alcoholic beverages for consumption off the premises on which they are supplied
The ‘premises’ to which HMRC refer in their guidance are the areas occupied by the food retailer or, any area set aside for the consumption of food by the food retailers’ customers, e.g. a restaurant or café area.
Supplies from vending machines follow the same general principles as food and drink supplied from catering outlets, as such where typically standard rated items (e.g. crisps, confectionery, beverages, etc) are purchased from a vending machine sited in a catering premise these supplies would benefit from the temporary reduced rate of VAT. However, the same type of supplies (crisps, confectionery, beverages, etc) purchased from a vending machine sited in thoroughfares and areas not designated for the consumption of food follow the VAT liability of the product sold, i.e. taxable at the 20% standard rate of VAT.
The zero rating for cold take away food still applies, as such if you have an agreed cold take away food percentage with HMRC this should still be used to apportion sales between the reduced rate of VAT and the zero rate of VAT when calculating the output VAT payable.
Temporary VAT cut for supplies of accommodation and admission to attractions across the UK
HMRC has confirmed that the temporary 5% reduced rate shall benefit hotels, inns, a boarding house, or similar establishments, when supplying:
• Sleeping accommodation, including bathrooms, living rooms and suites
• Accommodation used for the supply of catering
• Rooms provided with sleeping accommodation
Please note, the temporary reduced rate of VAT only applies to supplies of land and property that are currently chargeable at the standard rate of VAT. Accordingly, supplies of land and property that has not been subject to an option to tax shall remain an exempt supply, as would residential accommodation charges.
We will inform you of any further VAT easements from the Government relevant to the NHS as soon as we hear.
If you have any questions about anything in this alert or would wish to discuss further please contact us.
HM Revenue & Customs has announced today that the end date for the temporary VAT zero-rating of supplies of Personal Protective Equipment (PPE) in connection with coronavirus has been changed from 31 July 2020 to 31 October 2020.
The zero-rate came into effect from 1 May and covers supplies recommended for use in connection with protection from coronavirus in guidance published by Public Health England.
This includes:
o disposable gloves
o disposable plastic aprons
o disposable fluid-resistant coveralls or gowns
o surgical masks – including fluid-resistant type IIR surgical masks
o filtering face piece respirators
o eye and face protection – including single or reusable full-face visors or goggles
We will inform you of any further VAT easements from the Government relevant to the NHS as soon as we hear.
If you have any questions about anything in this alert, please contact us.
HMRC has announced that the introduction of the DRC for construction services will be delayed for a further period of 5 months from 1 October 2020 until 1 March 2021, citing the impact of the coronavirus pandemic on the construction sector.
There will also be an amendment to the original legislation, to make it a requirement that for businesses to be excluded from the reverse charge because they are end users or intermediary suppliers, they must inform contractors in writing of this status.
The DRC is an anti-avoidance measure designed to remove the potential scope for VAT on construction services being ‘stolen’ from HMRC by unscrupulous contractors. The measure is designed to shift the accounting for VAT on supplies of construction services in certain circumstances onto the customer rather than the supplier.
NHS bodies are likely to be end-users in the majority of cases and given the requirement to inform contractors of this status, there is no ‘do nothing’ option. You will still need to prepare for implementation from March 2021 and getting this wrong could give rise to penalties. CRS VAT will provide further updates on the DRC and how it affects the NHS in the coming months. This will include working with clients to implement the changes and running seminars.
If you would like to read more, HMRC has published a new Revenue and Customs Brief (7/2020) about this, which can be found here:
Should you have any questions on the DRC and how it will affect your organisation please contact us.
HM Revenue & Customs announced on 30 April a temporary zero-rate of VAT on supplies of Personal Protective Equipment (PPE) in connection with coronavirus.
The zero-rate comes into effect from 1 May to 31 July 2020 and covers supplies recommended for use in connection with protection from coronavirus in guidance published by Public Health England.
These supplies are normally subject to VAT at the standard-rate, so this new relief will benefit NHS and other bodies not able to recover VAT on purchases. This puts UK and EU supplies of PPE on a level footing with imports from non-EU countries, which were given temporary VAT and duty relief on 31 March.
The relief has been enacted by a Statutory Instrument which inserts a new Group 20 to Schedule 8 of the VAT Act 1994.
Products covered by the zero rate include:
o disposable gloves
o disposable plastic aprons
o disposable fluid-resistant coveralls or gowns
o surgical masks – including fluid-resistant type IIR surgical masks
o filtering face piece respirators
o eye and face protection – including single or reusable full-face visors or goggles
These temporary changes will not affect the VAT treatment of goods donated by a charity or from charitable funds, which are already zero-rated. The supply of any goods in connection with the provision of care or medical or surgical treatment are also not affected, as such supplies remain exempt from VAT.
Details of the relief can be found here:
https://www.gov.uk/government/publications/revenue-and-customs-brief-4-2020-temporary-vat-zero-rating-of-personal-protective-equipment-ppe/revenue-and-customs-brief-4-2020-temporary-vat-zero-rating-of-personal-protective-equipment-ppe
We will inform you of any further VAT easements from the Government relevant to the NHS as soon as we hear.
HM Revenue & Customs (HMRC) has today announced some further easements in VAT accounting for the NHS due to the ongoing COVID-19 situation.
Full details of the easements are shown on the attached letter, but to summarise:
COS VAT estimation
It has been recognised that some organisations may not be able to submit accurate COS VAT claims.
Requests for estimations must therefore be made in advance of the due date for the return, with a proposed end date. HMRC accepts that the end date may need amending due to the ongoing uncertainty.
HMRC has suggested the easiest and most reasonable method of estimation will be based on a representative period.
HMRC is still considering estimations for (business) input tax and output tax and will advise further in due course.
6 month COS VAT extension
The annual COS VAT deadline for 2019/20 has been extended from the June 2020 VAT return to the December 2020 VAT return, (filing date 7th February 2021).
This means that COS VAT incurred on invoices dated within 2019/20 can be claimed on any return up to December 2020.
This is a one-off extension, but will be reviewed given the current uncertainty surrounding COVID-19.
HMRC has not made any specific mention of an extension to end-of-year business and partial exemption adjustments, which themselves include end-of-year COS VAT adjustments, but we are awaiting further clarification of this point.
If you have any questions about anything in this alert, please contact us.
The Government is allowing NHS and other state and authorised non-state bodies to pay no import duty and VAT on protective equipment, relevant medical devices or equipment brought into the UK from non-EU countries during the coronavirus (COVID-19) outbreak.
It is unclear whether this relief will apply to subsidiary companies, but a non-state body can request authorisation by contacting the National Import Relief Unit (NIRU) by emailing niru@hmrc.gov.uk for an application form.
The relief will apply to imports of protective equipment, other relevant medical devices or equipment for the COVID-19 outbreak.
Full details of the relief and the relevant commodity code list you can claim relief on can be found here:
Goods imported into the UK for donation or onward sale to the NHS are also eligible for this relief and can be imported free of import duty and import VAT.
The relief currently applies until 31 July 2020. VAT on domestic supplies is not affected by this relief and VAT will still be charged as normal.
We will inform you of any further VAT easements from the Government relevant to the NHS as soon as we hear.
If you have any questions about anything in this alert, please contact us.
From April 2020 all 206 hospital Trusts in England will be expected to provide free car parking to groups that may be frequent hospital visitors, or those disproportionately impacted by daily or hourly charges for parking, including:
• Blue badge holders
• Frequent outpatients who have to attend regular appointments to manage long-term conditions
Free parking will also be offered at specific times of day to certain groups, including:
• Parents of sick children staying in hospital overnight
• Staff working night shifts
To date, most NHS car parks in England have been used to generate income by the NHS bodies that operate them and this income has been subject to VAT. There have been very few exceptions allowing for free parking. With the changes coming in from April 2020 NHS car parks shall become a mix of fee paying business use subject to VAT and free non-business use. Accordingly when considering VAT on expenditure in relation to car parks, Trusts need to determine if the expenditure relates wholly to taxable business use (e.g. the purchase of a new pay machine) or non-business use (e.g. designated areas for free parking users only).
VAT incurred on wholly business use expenditure shall be recoverable in full as business input tax and VAT on wholly non-business use expenditure shall be determined for recovery under the contracted out services rules (“COS”).
Where the expenditure does not fall wholly as taxable business use or wholly as non-business use and is not recoverable under the COS rules the VAT will be considered as an overhead, to which the amount of deductible VAT by the NHS body shall need to be determined under the Trust’s annual business activities and partial exemption calculation.
The capital goods scheme
The capital goods scheme (“CGS”) is applied to recognise the change in use of certain items of capital expenditure over a number years as there may be variations to the extent that the items are used to make taxable supplies. For construction works costing over £250,000 (excluding VAT) the CGS adjustment period is 10 years.
As the adjustment period is 10 years capital expenditure incurred on car parks completed before 31st March 2010 can be excluded from the change, as the 10 year adjustment period would have passed by the time the new car parking charges have effect.
For capital expenditure on NHS car parks in England falling within the CGS rules, the change of use in car parks from wholly taxable business to partially non-business will trigger CGS adjustments.
For example, suppose a new car park was completed in the 2018/19 financial year for a cost of £1m plus £200k VAT which would have been claimed in full. For the 2019/20 financial year there would be no adjustment as the car park remained wholly taxable business use, but from April 2020 the car park was used consistently for free parking 10% of the time the NHS body would have to repay £2k of the VAT claimed each year over the next 8 years.
In order to determine if your Trust will be impacted by the change in parking charges through the Capital Goods Scheme you should consider:
1. If you have had capital expenditure in relation to car parks costing more than £250k in the last 10 years.
2. Will those who are entitled to free parking use this car park?
3. How will the Trust implement the new car parking charges rules? E.g. dedicated areas or will they park in the same locations?
4. Has the Trust carried out a review to estimate what percentage of car parking use shall be free from April 2020?
If you believe that these changes could affect your Trust, please contact us.