We have learnt that the scope of VAT recovery under this COS heading is likely to be changing.
It has always been common practice for NHS bodies to recover VAT on supplies (from staff agencies) of admin and clerical staff under COS heading 69. Up until around 2007, it was in fact common practice for NHS bodies to recover VAT on all agency staff under this heading, however it was clarified by HMRC back in 2007 that this was meant only for agency staff filling secretarial, admin and clerical type roles. VAT on senior staff (managers, etc) was not to be included.
Since 2007 and up until very recently, we have had further correspondence with HMRC where this position has been confirmed. For example, HMRC wrote to some of our clients recently asking to see details of VAT recovery under COS heading 69 where the position on ‘junior’ vs ‘senior’ admin staff was re-confirmed.
HMRC have recently stated however that the interpretation of this COS heading is being changed, and that it is not meant for supplies of any staff.
Considering the fact that the Treasury Direction currently states ‘including agency staff’ and HMRC has confirmed this in various correspondence and visits up until very recently, we are awaiting formal guidance on when or whether the Treasury Direction will be amended.
We would therefore suggest that NHS bodies rely upon the published guidance and current wording of the Treasury Direction until formal changes are announced. This presumably would be from a future date going forward.