Further to significant lobbying and pressure from those within the care sector, HMRC is set to announce a new VAT refund opportunity for hospices. HMRC is changing its policy on the VAT treatment of Continuing Care funding received by hospices and other palliative care charities.
The potential change of policy should result in significant VAT savings, going forward and also retrospectively.
The Finance Act 2015 added two new sections, 33C and 33D, to the VAT Act 1994 with effect from 1 April 2015, which enabled the recovery of VAT relating to non-business activities carried out by palliative care charities (mainly hospices).
However, HMRC’s policy that the provision of care to a named patient under a Continuing Care funding arrangement was an exempt supply for VAT purposes, was controversial.
As a result, hospices were required to carry out often complex calculations to determine the correct amount of recoverable VAT.
Future impact of HMRC’s change in policy
HMRC have now conceded on this contentious point and will be amending their published guidance to confirm that Continuing Care funding should now be treated as non-business income, which will allow related VAT to be recoverable.
The previously disallowed input tax, relating to the funding received for named patients under the Continuing Care funding, will be recoverable going forwards and it should also be possible to submit a retrospective reclaim.
The way forward
Providing HMRC’s policy change has retrospective effect, it will be possible to review the recovery of VAT going back a number of years and submit a reclaim.
Should this policy change apply to your business, we strongly recommend that get in touch to discuss your position. We can review your current position and determine whether a claim is possible.
For further advice or information, please contact Jane Deeks on 07710 553831 or email firstname.lastname@example.org
We can provide you with a free no obligation fee quote.