CRS VAT and Sharpe Pritchard are pleased to announce the launch of our joint due diligence service for care contract restructuring.
CRS VAT and Sharpe Pritchard can assist NHS bodies in undertaking the essential due diligence checks to ensure that a care provider’s proposals do not present unacceptable risks for VAT and other regulations. Our due diligence service will satisfy the requirements of HMRC and other relevant bodies. By instructing CRS VAT and Sharpe Prichard to carry out the due diligence exercise, NHS bodies can agree to an appropriate restructuring request significantly more quickly and efficiently.
What is the care contract restructure?
Care Providers are approaching NHS bodies requesting to novate their care contracts to a new, unregulated “management” company. The contractual arrangements change, so they are between the NHS organisation and the new management company, with a regulated company delivering the care under contract to the management company.
One of the benefits to the providers is that this allows them to reclaim significantly more VAT costs.
Risks to NHS bodies
Following the restructuring, an unregulated company will supply the NHS body with welfare services. The VAT exemption will not apply, and VAT will be charged on the supplies made to the NHS body. The intention is for the NHS body to reclaim this VAT under Heading 71 of the Contracted-out Services VAT rules.
However, a NHS body can only recover VAT that is properly charged. HMRC has powers to deny VAT recovery where an arrangement is “abusive”, i.e., artificially structured just to achieve a better VAT position.
A NHS body must also operate within a specific legal framework and meet numerous regulatory, procurement, contractual, tax compliance, and other responsibilities. Just some of the risks that need to be reviewed and dealt with to an NHS body’s satisfaction include:
- Public law and vires
- Contract law (ensuring effective novation and legal due diligence on the proposed model)
- Procurement law: variations to existing contracts under Regulation 72 Public Contracts Regulations 2015
- Contract novation: which type is proposed and how will it treat pre-novation liabilities
- Legal due diligence and corporate governance
- The transparency of all proposed legal arrangements
- The consistency of the subcontract and re-charge/management arrangements
- Corporate governance
- Information about the Directors in the new company
- Effect on contract management
- Re-alignment of contract escalation processes
NHS bodies typically want to cooperate with providers and are happy to consider requests for a contract novation. But to ensure they meet their various responsibilities, it is prudent for NHS bodies to conduct a due diligence review of a provider’s proposals to ensure they would not create any unacceptable risks to its ability to comply with those responsibilities.
CRS VAT and Sharpe Pritchard can assist NHS bodies in undertaking the essential due diligence checks to ensure that the novation proposal does not present any unacceptable risks for VAT and other regulations. Our due diligence service will satisfy the requirements of HMRC and other relevant bodies.
By instructing CRS VAT and Sharpe Pritchard to carry out the due diligence exercise, NHS bodies can agree to an appropriate novation request significantly more quickly and efficiently. Typically, there will be no cost to a NHS body for the CRS VAT and Sharpe Prichard’s due diligence service.
Next steps
If you are interested in our Due Diligence service, we will be pleased to discuss it further on a no-cost Teams call. We will give you more information about how the service will work and how your organisation can benefit from assisting its care providers in a way that presents little or no risk across all the affected tax, procurement, legal, and contractual areas.
To learn more or to arrange a free initial consultation, please contact us at june.wright@crsvat.com