We have had some further guidance from HMRC on the matter of GPs charging for advice on setting up CCGs.
HMRC have in the past advised GP practices that VAT should be charged (depending upon registration limits, etc) for these services. Furthermore, provided the work is of an advisory nature, the VAT should be recoverable by the recipient PCTs under COS heading 52. This advice was confirmed by HMRC as being correct.
HMRC has now advised that, any payments made to GPs for practice based commissioning work is ‘outside the scope of VAT’ and this applies to payments by PCTs to GPs for transitional work on CCGs.
This is quite important as it would seem that HMRC have previously taken a hard line with some GP practices which have failed to register and charge VAT. Also, some if not most GPs are only potentially liable to register as a result of this type of income, so it would appear from the last point that some may have registered for VAT and been penalised incorrectly and the PCTs are incorrectly recovering VAT charged.
Based upon this revised guidance, the GPs which have charged VAT should raise credit notes and re-issue their invoices without VAT. The VAT recovered by the PCTs should also be adjusted for in the VAT accounts.