Expanding Our Expertise in NHS VAT, Employment Taxes, Corporate Taxes, Land Taxes & Custom Duties

For years, CRS VAT has been the trusted partner for NHS bodies seeking to maximise VAT recovery, strengthen compliance, and reduce HMRC risks. From 1 October 2025, we will evolve into CRSTAX, reflecting our ability to deliver a broader range of tax services to the NHS while maintaining the same unrivalled VAT expertise you know us for.

This change brings together our established VAT specialists with experts from across our group, creating a single, dedicated team supporting NHS organisations covering all areas of taxation – including employment taxes, corporate taxes, land taxes, and customs duties.

Why the Change Matters for the NHS

We understand the pressures facing NHS finance teams – rising costs, compliance challenges, and the constant need to maximise savings. Employment tax obligations are growing more complex each year as well and even small errors can result in costly penalties and underfunding of vital services. With CRSTAX, you have a partner who not only understands the NHS but has the technical expertise to protect its financial future.

Our Expanded NHS Tax Services

As CRSTAX, we continue to offer our full suite of NHS VAT services – including recovery reviews, compliance checks, COS re-reviews, training, and HMRC enquiry support. Alongside this, our enhanced service portfolio now includes:

HMRC Compliance Reviews

HMRC continues to carry out compliance reviews of NHS organisations, often focusing on expenses and benefits, salary sacrifice, IR35 compliance, Construction Industry Scheme (CIS), and termination payments. Errors can lead to significant liabilities and penalties.

We have a proven record of achieving positive outcomes for NHS bodies. In one case, HMRC initially calculated a liability of over £400,000, but following our intervention the final settlement was reduced to just £30,000.

Expenses and Benefits

We advise NHS organisations on the full tax treatment of staff benefits – from salary sacrifice arrangements and staff awards to P11D reporting/payrolling of benefits and PAYE Settlement Agreements. This ensures benefits remain tax-efficient while fully compliant.

Status and Off-Payroll Working (IR35)

With the revised IR35 rules placing responsibility for assessing employment status onto NHS bodies, we provide practical support. This includes drafting or revising policies, assisting with individual status determinations, supporting SDS appeals, and managing HMRC disclosures.

Construction Industry Scheme (CIS)

NHS finance teams can often be unfamiliar with the complexities of CIS, leading to errors in reporting. We deliver training, audit checks, and practical guidance to ensure compliance – reducing the risk of penalties.

Termination of Employment

Payments made under settlement agreements or redundancy schemes can have complex tax implications. We advise NHS bodies to ensure these payments are structured correctly, avoiding unexpected liabilities.

Pension Planning and Education

Working closely with NHS finance and HR teams, we deliver pension education and tailored planning advice to ensure compliance and optimise staff outcomes.

Corporate Taxes

NHS organisations engaged in trading or commercial activities may face corporation tax obligations. We provide guidance on structuring, compliance, and disclosure to ensure that NHS bodies meet their obligations while minimising liabilities.

Land Taxes (SDLT, LTT, LBTT)

Property transactions such as lease arrangements, acquisitions, or disposals can give rise to Stamp Duty Land Tax (SDLT in England), Land Transaction Tax (LTT in Wales), or Land and Buildings Transaction Tax (LBTT in Scotland). Our advisers ensure that NHS organisations apply the correct tax treatment, claim available reliefs, and avoid costly errors.

Customs Duties

Where NHS organisations import medical supplies, pharmaceuticals, or specialist equipment, customs duties can apply. Our team advises on tariff classification, duty reliefs, and the correct use of import documentation to avoid overpayments or penalties.

Case Studies – Delivering Taxation Value to the NHS in Practice

• VAT COS Re-review Savings – Our secondary reviews frequently uncover £30K to £800K in additional recoveries, after a competitor has already completed a review.
• HMRC Settlement Success – As highlighted above, we reduced one NHS organisation’s HMRC liability from £400K to £30K, delivering immediate savings and future compliance confidence.
• Employment Tax Clarity – We have helped NHS bodies rewrite IR35 policies and successfully defend HMRC challenges, ensuring correct application without unnecessary costs.

Taxation Built for the NHS

Unlike generic tax advisers, CRSTAX is a dedicated full-taxes team focused exclusively on NHS organisations. Our advisers include Chartered Tax Advisers and former HMRC officers, combining frontline knowledge with practical sector experience.

This unique expertise ensures we don’t just identify issues – we deliver solutions that [provide value/save money], improve compliance, and strengthen internal processes.

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.

Our newsletter dated 12^th June 2014 explained that HM Revenue & Customs (HMRC) had informed the NHS that the proper tax point (time of supply) rules should be applied to Contracted-out services (COS) VAT recovery. This meant that COS VAT should be claimed on the VAT return for the period in which the invoice is dated, or by the annual deadline at the latest.

Historically, NHS bodies have recovered COS VAT on a return relating to either the period in which the invoice is dated (registration), the period the invoice was approved for payment, or the period in which the invoice is paid. This has meant that if an invoice is in dispute, the VAT may not have be claimed until several months or even years after the tax point date.

A relaxation of the rules followed and temporarily, NHS bodies were able to continue to recover COS VAT at the time an invoice was paid, irrespective of the tax point date.

HMRC has now re-iterated the proper tax point rules in their letter dated 29^th July 2015 and clarified that COS VAT should be claimed in the VAT accounting period when the tax becomes chargeable (normally the time of the supply, or tax-point).  HMRC has acknowledged that ‘it may present difficulties where claims have been made based on the date of payment, resulting in a possible a need to make changes to accounting systems and processes’. In such circumstances HMRC will allow an extension of time up to 31 March 2016 for NHS bodies to make necessary changes; but after this time claims must be made when the VAT in question becomes chargeable.

We would therefore recommend that the tax point rules are adopted as soon as possible. Any NHS body which has already adopted the tax point rules should continue to use this method.

In summary, at present any COS VAT incurred on invoices paid within the 2014/15 financial year must be claimed by the 31 July 2015 deadline irrespective of the tax point. Going forward, it is recommended to adopt the tax point rules as soon as possible to avoid any potential loss of VAT recovery.

As part of the ongoing review of the COS VAT guidance, HM Revenue & Customs (HMRC) has advised us that the next batch of COS guidance will confirm that VAT incurred on the hire, lease or rental of multifunctional devices which serve as printers, photocopiers and faxes is eligible for recovery under COS Heading 25.  This is following consultation with HM Treasury on the definition of this heading.  This is welcome news as it is a further example of the COS guidance being updated to take account of developments in technology.

Historically, this heading was restricted to photocopiers only.  NHS bodies should ensure that any VAT incurred on such contracts during the 2014/15 financial year is recovered on a VAT return before the 31st July 2015.

HM Revenue & Customs (HMRC) has now confirmed in a new letter issued to NHS Trusts that it does not intend to raise assessments to claw back VAT said to have been over-recovered under COS heading 69 in periods prior to 1st April 2014.  This is following the previous letter issued in February 2014, which clarified that heading 69 did not allow for the recovery of VAT on supplies of clerical or administrative staff provided by employment agencies. Heading 69 was only meant to allow for the recovery of VAT on outsourced typing, secretarial, telephonist or clerical services, by a supplier which uses its own staff or agency staff, who are under the direction of the supplier/agency.

HMRC’s February 2014 letter stated that the revised interpretation was effective from 1 April 2014, but they did not rule out the possibility of applying the clarification retrospectively.  NHS bodies had historically been allowed to reclaim VAT incurred on certain grades of clerical and administrative staff provided by agencies.  Although this has been described as a ‘misunderstanding’ by HMRC, the previous published guidance, newsletters and actions of visiting HMRC officers clearly allowed this heading to be interpreted in this way.  It is therefore not entirely surprising that following a review, HMRC has now decided not to assess years up to and including 31 March 2014.

HMRC state that they may still pursue inaccuracies up to 31 March 2014 and for subsequent years should it be discovered that NHS bodies have claimed VAT recovery outside of the job roles indicated in the heading in respect of supplies of staff or of services.

HM Revenue & Customs (HMRC) has now published the first ‘wave’ of the revised single book of COS VAT guidance for Government departments and NHS bodies, following the review of interpretation of the rules. This has gone live on GOV.UK.

The external link which takes you directly to the Contracted Out Services guidance is http://www.hmrc.gov.uk/manuals/vatgpbmanual/VATGPB9700.htm or to access via GOV.UK go to the Revenue & Customs page > VAT > scroll down to VAT manuals > select ‘get manuals from the HMRC website > select ‘G’ > Government and public bodies > VATGPB9000 > VATGPB9700.

Although there seem to be some changes to the interpretation of several headings, HMRC has stressed that there are no policy changes, which means the guidance is simply a statement of the current rules as they stand.

There is therefore no set date from which the rules apply, so NHS bodies can apply these rules retrospectively for the current (2014/15) year.

On first reading the new guidance, notable points are:

Heading 1 – Accounting, Invoicing and Related Services

This includes general record keeping, invoicing and preparation of tax returns and other related supplies and preparation of financial accounts and/or statements and accountancy advice. However, tax planning advice is specifically excluded.

This heading therefore seems to allow general tax compliance work which is used to complement in-house tax return preparation, but not specific advice.  Reference is also made to the Treasury rules and NHS guidance which dissuades the use of tax avoidance schemes.

Heading 7 – Broadcast Monitoring Services

This now includes social media monitoring, for example Facebook postings, Twitter feeds, etc.

Heading 10 – Catering

This includes hire of agency staff relating to catering.  It also includes vending machines when supplied as part of a catering contract.

Heading 65 – Training, Tuition or Education

This has now been clarified to include on-line training.  Although most NHS bodies have claimed this VAT to-date, it is encouraging to see the guidance updated to take account of developments in technology.

We understand from HMRC that there are still several headings where technical discussions are still taking place with the policy team and other experts, including definitions within COS headings 14 and 31.

There are other headings yet to be published where HMRC are awaiting guidance from HM Treasury, including COS headings 25 (relating to photocopiers/multi-function equipment), 45 and 52.  These last two are likely to be the very last to be published.

Until the revised guidance is published, HMRC has stressed that previous guidance can still be relied upon.

All in all, there are likely to be four ‘waves’ of publication according to HMRC. We’ll keep you updated as soon as further information is available.

As most NHS bodies are aware, HM Revenue & Customs (HMRC) has been actively reviewing the interpretation of the Treasury Direction COS VAT guidance.  This is following the aborted attempt earlier this year to impose the more restrictive Government Department (GD) rules on the NHS.  At the time, HMRC was forced to back down and instead consult with the NHS before making any changes.

It was originally anticipated that the revised guidance following the consultation would be part-published in November 2014 incorporating both GD and NHS bodies, however, we have now been informed that the publication date has been put back to mid-January 2015.

Specific items which could be subject to change include:

COS Heading 52 – Professional Services

This is likely to be restricted to ‘advice’ or ‘opinion’ only.  NHS bodies may no longer be able to recover VAT on consultancy costs for implementing changes, including legal representation or professional fees related to capital projects.

COS Heading 31 – Laboratory Services

Following the GSTS Tribunal decision earlier this year that pathology testing involving patient samples is exempt from VAT, the scope of this heading is being reviewed.  This may mean that VAT charged on outsourced laboratory facilities (including equipment, management, reagents, maintenance, training, etc.) may no longer be eligible for recovery under this heading.

COS Heading 45 – Healthcare Facilities

In a letter recently issued to the HFMA, HMRC implied that a ‘healthcare facility’ was a physical building, unit or area within a building which is run/operated by the contractor which enabled the NHS body to occupy the facility to deliver healthcare.  This definition would mean that COS heading 45 would still cover PFI hospitals and other similar facilities, but may well exclude managed facility contracts which are heavily based upon the provision and availability of equipment and consumables.
Other areas potentially subject to change include:

COS Heading 10 – Catering Services

This may now be extended to supplies of catering staff.

COS Heading 14 – Computer Services

This may exclude private data lines, which were specifically included in the previous NHS guidance.

Our initial thoughts are that the anticipated changes will significantly restrict the scope for VAT recovery of NHS bodies, many of which are already in serious financial difficulty.  We will issue a further update once we have more information.

HM Revenue & Customs (HMRC) issued a letter to the NHS in December 2013 stating that the proper tax point (time of supply) rules should be applied to Contracted-out services (COS) VAT recovery.  This meant that COS VAT should be claimed on the VAT return for the period in which the invoice is dated, or by the annual deadline at the latest.  In the same letter, the annual COS deadline was extended a further month to 31 July.

Historically, NHS bodies have recovered COS VAT on a return relating to either the period in which the invoice is dated (registration), the period the invoice was approval for payment, or the period in which the invoice is paid.  This has meant that if an invoice is in dispute, the VAT may not have be claimed until several months or even years after the tax point date.

Following various representations made about the timing of HMRC’s proposed changes and the lack of any transitional period, HMRC has now ‘relaxed’ this tax point rule for the time being.  This means that NHS bodies can continue to recover COS VAT at the time an invoice is paid, irrespective of the tax point date.

HMRC has told us that as part of the ongoing review of NHS and Government VAT following the recent publication of interim guidance, further guidance will be issued in the coming months making it compulsory for the NHS to adopt the tax point rules, with a likely start date from April 2015.

We would therefore recommend that the tax point rules are adopted as soon as possible, to ensure that COS VAT on invoices dated prior to April 2014 but not yet approved or paid is not lost.  Any NHS body which has already adopted the tax point rules should continue to use this method.

In summary, at present any COS VAT incurred on invoices paid within the 2013/14 financial year must be claimed by the 31 July 2014 deadline irrespective of the tax point.  Going forward, it is recommended to adopt the tax point rules as soon as possible to avoid any potential loss of VAT recovery.