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VAT Standardisation and the NHS – Our View

VAT standardisation will affect not only the NHS… so we need clarification

The standardisation of VAT across the NHS which will kick in in March has been met with chagrin from many consultants working with the NHS, let alone the budget holders having to manage the impact within the monolith from the 1st April.
Until now, outsourced services bought in by the NHS have been exempt from VAT, including administrative agency staff, estates maintenance and professional services, including consultancy. So where last month’s article celebrated the fact that the NHS recognises the need for specialist skills and expertise, this month’s concern revisits that and wonders what impact this new standardisation may have on buying in that expertise…

An opportunity… or a risk…?

On one hand, these changes may mean that the smaller consultants and consultancies will pick up bigger NHS contracts, simply due to their fees being lower than the top 5 (KPMG, PWC, Capita, etc). But on the other hand, all consultants across the board will suddenly become 20% more expensive through no fault of their own…

A key concern to flag up, therefore, is that if budget holders need to find 20% savings on buying in specialisms and expertise – will they still buy them in? Or will the NHS revert back to their old ways of trying to do everything ‘in-house’ without the necessary skills and experience they need? Over the last few years, the NHS has made great strides into finding the right person for the right job and buying in the expertise when needed. Our concern at Veritas is that these VAT changes may well cause some decision makers and budget holders to close ranks and ‘make do and mend’ with what they have. Not ideal…

What we need is clarity

Realistically, too, it would be naive to think that the ‘bigger boys’, such as KPMG & PWC won’t find the VAT loopholes. They are resourced more than sufficiently to do this and the level of the contract values mean that it would be worth the time and money to find those loopholes.

Another grey area is that in the past, Section 75 agreements have meant that integrated community equipment and services and wheelchair services have been exempt from VAT, so from the perspective of the finer detail, we do need to understand fully what’s in and what’s out of these changes, in order to understand how they’re going to impact us.
Exact clarity from the Government & HMRC is needed on these VAT changes, otherwise people will find ways to work around them.

This entry was posted on Wednesday, 2nd April 2014 at 12:28 pm and is filed under News.

Tags: commissioning, consultancy, contractors, NHS, VAT

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