• NHS
• Government
• Education
• Charities
• Housing Associations

Strategic VAT Planning

With increased financial demands placed on the NHS, proper VAT planning is vital to the financial success of all projects.

Whether you purchase goods or services, there will be VAT implications which could increase costs considerably and reduce the power of your budget.

By understanding the effect of VAT in the planning process, value can be added to your resources.

The VAT Liaison Strategy Team provides timely planning advice and uses the most innovative solutions to help you protect and maximise your resources.

Corporation Tax

Corporation Tax (CT) is an evolving area and interpretation of the legislation can seem difficult without proper guidance.

VAT Liaison can help you manage your transactions in the most tax efficient manner, while saving you time in the implementation.

Corporation Tax service provision includes:

Lennartz Mechanism

An NHS Trust is entitled to make use of what is referred to as the Lennartz mechanism, which is a relatively new method of recovering VAT for bodies engaged in non business activities.

One of the main principles behind the Lennartz mechanism is the intention at the time of construction.

The main condition for using the Lennartz mechanism is that there must be a taxable supply made within the building. At present, HMRC has not set any de minimis level of such activities, although the more substantial the taxable supplies the more likely any proposals are to be accepted. Taxable supplies can include the following:

* This list is not exhaustive and any taxable supply can be included.

The main benefit of the Lennartz mechanism is that the Trust will be able to recover all or most of the input VAT on each payment, and then repay the VAT which relates to the non business use over a period of 10 years. If the level of non business use remains constant over the 10 year period then the payback should be equivalent to the VAT recovered. Although there are obvious initial savings, the VAT must be repaid and the administrative implications must be considered.

Fuel and Power

The purchase of all forms of fuel and power will normally bear VAT at the standard rate and the Climate Change Levy will also be added.

There is scope for VAT to be charged at the lower rate of 5% and in such cases the CCL is also relieved. This normally only applies to residential and charitable properties. Where a Trust is not receiving the maximum relief to which it is entitled it should be possible to obtain a refund of overpaid VAT for the previous three years.

Managed Equipment Services

New medical equipment is one of the Trust’s main costs. VAT recovery is not allowable on the purchase or lease of such equipment and so this becomes an additional cost to the Trust. The concept of managed equipment services, where the supplier provides the equipment and a range of additional services, is becoming increasingly common within the NHS. Such agreements can offer scope for VAT recovery but this is a contentious area and VAT recovery is often refused by HMRC.

Employment Tax

Employers need to comply with the PAYE regulations and therefore need to ensure they are aware of the inevitable and regular changes in legislation. Non-compliance can result in large penalties for the employer as well as potential overpayment of tax to HM Revenue & Customs.

VAT Liaison can advise on all aspects of PAYE and NI to ensure you maintain accurate records and payments to HM Revenue & Customs, as well as enabling clients to implement tax efficient and rewarding benefit schemes for their staff.

PAYE service provision includes:

Construction Industry Scheme (CIS)

Its not just traditional builders who are required to be registered for CIS. Broadly speaking construction work refers to any work in construction, alterations, repair, decoration or demolition of buildings. Therefore if any business spends over £1 million a year (on average over a three year period) on this type of work, then they may be liable to register for CIS.

The rules of the scheme changed in April 2007, which has changed the administration of the scheme as well as now introducing a declaration to confirm you have checked the employment status of the sub-contractor.

VAT Liaison can assist by assessing if your organisation needs to register for CIS, check the correct employment status of sub-contractors and review compliance to ensure all statutory requirements are being met to avoid financial penalties.