NHS seeking to reclaim VAT reimbursements re premises for dispensing practices
All dispensing practices have to be VAT registered because of the zero rated supplies they make. However, because of their exempt income they can usually only recover a proportion of the VAT that they incur on expenditure, i.e. they are partially exempt. Examples of the types of expenditure of which only a proportion of the VAT incurred can be recovered include, general overheads of the Practice including gas, electric, repairs, etc. In addition, if the property is rented and the landlord has elected, VAT will be chargeable on the rent and so in most cases practices will have made a claim for a proportion of the VAT charged on rent to be recovered under the partial exemption calculation.
However this will lead to an over recovery of VAT because under the NHS Premises Costs Directions the practice would have been in receipt of a gross rent reimbursement for the whole rental cost including all of the VAT.
The new 2013 NHS Premises Costs Directions specifically clarify this issue and the rules are now being actively enforced in this respect which in many cases were not enforced under the old 2004 Directions.
The NHS England national team now consider that the duplicate reimbursement of costs is not appropriate and as such they are advising Area Teams that they should seek to recover any duplication reimbursements for however long they have arisen.
If you are approached by your Area Team you will be asked to undertake an exercise to calculate the amount of duplicated reimbursed VAT. Moore and Smalley can assist in undertaking this work and liaising with the Area Team on your behalf.
If you would like further information about this area please contact Debbie Wood on 01253 404404 or 0115 972 1050.