New VAT refund opportunity for Hospices
Major reversal of VAT policy for Continuing Care funding
HMRC are set to announce a major reversal of their existing policy on the VAT treatment of Continuing Care funding received by hospices and other palliative care charities. The anticipated change comes after significant lobbying and pressure from those within the sector and should result in significant VAT savings, both current and also retrospectively in relation to periods where HMRC’s current policy has been followed.
Hospices have enjoyed a significantly enhanced VAT recovery position since earlier changes were introduced from 1 April 2015, which effectively granted palliative care charities special status to recover VAT on their non-business activities. However, a point of contention has always been HMRC’s insistence that the provision of care to a named patient under a Continuing Care funding arrangement was an exempt supply for VAT purposes. The impact of this has been that hospices were required to carry out often complex calculations to work out the exact amount of VAT that could be recovered, which in turn placed restrictions on the VAT that could be recovered on both capital expenditure and ongoing running costs.
However, we now understand that HMRC have conceded this point and will shortly be revising their published guidance in this area to confirm that Continuing Care funding should now be treated as non-business income, which will open the door to increased recovery.
Commenting on the forthcoming change David McDonnell, the VAT Director in our London office, said:
“This is extremely welcome news for the sector and represents a very real opportunity for hospices to recover significant sums of VAT from HMRC. We are expecting the policy change to have retrospective effect, which will open up the ability to revisit not just the recovery of VAT on general overheads, but also potentially on any significant capital expenditure undertaken within the past ten years. We strongly recommend that anyone who may be affected by the policy change reviews their position as soon as possible with a view to submitting a claim to HMRC where appropriate.”