Healthcare income via commercial entities

HMRC’s position has always been that ‘normal’ VAT liability rules apply where a private entity is engaged to provide NHS patient care and where there is subcontracting of some elements back to an NHS body. As a result, some NHS organisations have incurred unforeseen VAT costs because the supplies back to the private entity are deemed to be exempt business activities resulting in a loss of COS VAT recovery.

Discussions concerning this issue between DHSC and HMRC are ongoing and recommendations from the Health and Social Care Committee may also have an impact on the outcome. It remains to be seen whether HMRC’s view changes as a result of these deliberations.