- The previous government proposed a reform to the current VAT rules allowing certain public sector organisations to claim VAT refunds on certain outsourced services – referred to as the Contracted-out Services VAT refund rules. It believes the rules are unduly complex, are a burden and create a barrier to financial planning.
- The previous government’s preferred option is to allow full refunds for VAT incurred on goods and services used in the course of non-business activities (the “full refund model”).
- Timing: a consultation closed on 19 November 2020 and the responses were published on 20 July 2021. The previous government intended to continue working with stakeholders on the proposed reform. However, it is not clear when any changes may come into force.
Resources (click to open)
- VAT and the Public Sector: Reform to VAT Refund Rules (HMT policy paper (August 2020), response paper (July 2021))
