VAT and Government Departments

This book is both a reference manual and a practical guide for those managing VAT in the UK's government departments. Government department VAT has been the subject of an HMRC consultation/review with new guidance published in 2015 (consolidated with revised NHS guidance). Public sector organizations in the UK must be registered for VAT where they engage in 'economic activities,' especially where there is any competition with the private sector. There are special rules for government departments (and the NHS) under section 41 VAT Act 1994, known as the contracted-out services or COS rules (in relation to non-business activities), and Value Added Tax itself, governed by the VAT legislation (in relation to business activities). To understand VAT in a government department context, it is essential to understand the fundamental duality in the tax in relation to the public sector. This is often overlooked, and because - in certain situations VAT can apparently be recovered in both contexts - COS eligibility to recover and input tax entitlement on VAT incurred can be confusing. The book identifies the complex issues in the tax relevant to government departments and, in a logical analysis, explains these from a compliance perspective and in relation to the organizational activities of government departments (providing further references where appropriate if more detailed information is required). It is based on published HMRC and Treasury guidance and policy, as well as on current UK case law and legislation in force as of April 30, 2015