HMRC’s COS VAT guidance is being continually updated to clarify their view on what types of IT supply are eligible for a VAT refund, in particular, the meaning of ‘to the specification of the recipient’.
The current guidance states that the system/software should not be simply designed and built to meet certain perceived needs. There must be substantial involvement by the government department, NHS body or wider NHS in the supply or modification of the system beyond merely entering into a contract.
We have assisted many NHS clients in analysing IT procurement contracts in order to determine whether they meet the COS VAT recovery criteria. This has included quantifying aspects such as the initial design costs, associated software licences and hardware and ongoing running costs, to determine eligibility.
This has included agreeing VAT recovery on contracts for a number of clients such as:
- Electronic Patient Records (EPR)
- Virtual Desktop Infrastructure (VDI)
- Network Managed Services Infrastructure (NMSI)
We have very recently secured approval from HMRC for a VAT refund in excess of £1m for one client relating to a range of IT contracts. All of these contracts when linked together form an IT infrastructure built to the Trust’s specification. For the infrastructure to function, the Trust required iterations of standard operating systems which HMRC accepted as being sufficiently modified to meet to the NHS specification.