There is a general misconception within the NHS that all contracts which are described as ‘managed services’ are eligible for VAT recovery. This is not necessarily the case. A contract is only eligible for VAT recovery under the NHS contracted-out services (COS) rules if the services are of a type listed in the Treasury Direction and within the guidance published by HMRC.
We have helped many NHS Trusts and several suppliers of services to determine the correct VAT treatment of various managed service contracts. Typically, this has involved reviewing the principal elements and whether these meet the guidelines. We also consider various other aspects such as ancillary or integral supplies, levels of ‘labour and expertise’ and guarantees of availability in order to determine the correct VAT treatment.
We have recently conducted VAT training workshops for NHS procurement staff at various locations in order to transfer our knowledge in this critical area of NHS VAT.