back to article HMRC clamps down on gov bodies wanting to reclaim VAT on IT kit

Government bodies seeking to reclaim cash from the taxman for expensive IT purchases will face more stringent compliance rules from April. Currently bodies can claim back VAT on a number of services once the invoice has been paid to their supplier. However, from 1 April the recovery rules will be changed, limiting the period …

  1. AMBxx Silver badge
    WTF?

    Someone explain this

    Sounds to me like all that's happened is that they're swithching from using a cash basis for VAT (as for small companies) to an accrual basis (as for large companies).

    It nets out to zero, with just a change in cash flow. If they're really using delayed VAT to fiddle their annual budgets then they're getting what they deserver.

    1. Tony S

      Re: Someone explain this

      That's what it sounds like to me; and it makes a lot of sense, especially if it then encourages them to actually pay the invoices on time.

      1. AMBxx Silver badge

        Re: Someone explain this

        Lots of fun when public sector pay late - last time I received a grovelling phone call from their 'compliance officer'. If they just paid on time, they could stop wasting money on non-jobs like that.

  2. Halfmad

    Sizeable amount

    In the NHS where I work it's less than 1% of total spend, yet we're absolutely reliant on it.

  3. Red Bren
    Facepalm

    Money-go-round

    Why are public sector bodies paying VAT in the first place? It's all taxpayers' money anyway, but this money-go-round requires oversight which adds cost.

    The sensible move would be to exempt them from paying VAT and save money on the bureaucracy. But this feels more like an ideological move, adding further administrative burdens to already stretched public services, so the government can then claim it's all too inefficient and needs to be privatised

    1. BoldMan

      Re: Money-go-round

      That would just offload the admin to someone else - TANSTAAFL when it comes to VAT.

      1. AMBxx Silver badge

        Re: Money-go-round

        They're not - this is to do with how it's reclaimed. You could equally say 'why do they bother reclaiming' as it's all government money any way.

        When I invoice the NHS, I have to add VAT to my invoice. Only alternative would be to come up with a system whereby I zero VAT all invoices to the NHS. That just gives fraudsters a way in.

    2. F0rdPrefect

      Re: Money-go-round

      If you exempt anybody from paying vat, so that I don't have to charge them, you increase my admin and as a small business, dealing with the red tape involved in that would be a nightmare.

      Simplest thing would be for Government and NHS to work to same vat rules as business, instead of the arcane ones that they do, which would decrease their admin burden to the same as commercial organisation, rather than having to record VAT charged and then record and report on "irrecoverable" VAT.

      Get wording wrong on your invoice and you can cost your customer the VAT, which reduces the amount of money they can spend with you as the VAT usually comes out of the same budget pot as your invoice.

  4. Whitter
    Holmes

    Side-effect by accident or by intent?

    Is this actually intended to pressure (public) companies / bodies into paying their invoices promptly?

    If so and if it works, will it roll out to all companies later?

    1. AMBxx Silver badge

      Re: Side-effect by accident or by intent?

      It's at small companies already - called cash accounting. Good for cash-flow if you're profitable and your income is has VAT on it.

      Not so good for the NHS where there's no income (other than from govt), but the expenses have VAT.

    2. F0rdPrefect

      Re: Side-effect by accident or by intent?

      Why would when VAT is claimed have any effect on when invoice is paid?

      Two totally separate procedures and often done by staff in different offices.

  5. EnviableOne
    FAIL

    and the point is....

    SO HMRC are going to charge NHS trusts more, The trust will be in more deficit, DFH will bail them out, The tax revenue will be pulled from HMRC to offset the loss in DFH, sounds like a worth while exercise.....

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