VAT — refunds to the Health Services Safety Investigations Body
Published 12 November 2024
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This publication is available at https://www.gov.uk/government/publications/the-value-added-tax-refund-of-tax-to-the-health-services-safety-investigations-body-order-2024/7568b179-db2a-4e63-8912-09595de02e28
Who is likely to be affected
The Health Services Safety Investigations Body (HSSIB) which was established in October 2023.
General description of the measure
This measure will entitle the HSSIB to receive refunds of Value Added Tax (VAT) incurred on certain services purchased to support their non-business activities.
Policy objective
Where non-departmental public bodies (NDPBs) and similar bodies carry out similar activities to government departments, these bodies are able to recover the VAT incurred on services purchased in support of their non-business activities, insofar as the Treasury directs and where either:
- the activities are publicly funded and could have been carried out by, or under the control of, a government department that is eligible for VAT recovery under section 41
- the bodies have entered into a cost-sharing arrangement
Background to the measure
Under the normal rules, VAT can only be reclaimed on the purchase of goods and services made by a VAT-registered person, and which are used in the course of taxable business activities. NDPBs, like government departments, mostly engage in non-business activities and therefore cannot ordinarily reclaim the VAT on purchases made to support those activities.
Government departments may reclaim VAT on the cost of contracting out a number of services, or the VAT incurred in cost-sharing arrangements, listed in a Treasury direction. This scheme ensures that what would otherwise be irrecoverable VAT does not become a disincentive to contracting out public services to other providers, or to departments sharing their back-office costs.
Section 33E of the Value Added Tax Act 1994 (‘the Act’) was enacted in 2016, initially to ensure that what would otherwise be irrecoverable VAT did not dissuade NDPBs and similar bodies from entering into cost-sharing arrangements. The policy objective was subsequently expanded to include publicly funded activities that could have been carried out by, or under the control of, a government department.
The Treasury has the power to make an order specifying the persons that are eligible for refunds of VAT under section 33E, subject to any necessary adjustments to their public funding. Once this has happened, the bodies can reclaim VAT insofar as the Treasury direction already mentioned permits.
The HSSIB is a publicly funded body which investigates patient safety concerns across the NHS in England and in independent healthcare settings where safety learning could also help to improve NHS care.
Detailed proposal
Operative date
The instrument will have effect from 3 December 2024.
Current law
Section 33E of the Act allows for refunds of VAT incurred on non-business activities to specified persons as directed by HM Treasury. Section 33E(8) defines a specified person as any person named as such in an order made by HM Treasury.
Proposed revisions
HM Treasury will make an order specifying the HSSIB as a person entitled to recover VAT under section 33E.
Summary of impacts
Exchequer impact (£ million)
| 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028-2029 |
|---|---|---|---|---|---|
| Nil | Nil | Nil | Nil | Nil | Nil |
This measure is not expected to have an Exchequer impact.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
There is expected to be no impact on individuals as this measure only affects the HSSIB.
This measure will have no impact on family formation, stability or breakdown.
Equalities impacts
It is not anticipated that there will be impacts for those in groups sharing protected characteristics.
Impact on business including civil society organisations
This measure will have no impact on businesses as it specifically relates to VAT recovery by a single body, the HSSIB.
This measure is expected overall to have no impact on businesses’ or individuals’ experience of dealing with HMRC as the change does not alter any processes or tax administration obligations.
This measure is not expected to impact civil society organisations.
There is no impact on individuals as this measure only affects local authorities.
Operational impact (£ million) (HMRC or other)
It is not anticipated that implementing this change will incur any additional costs or savings for HMRC.
Other impacts
No other impacts have been identified.
Monitoring and evaluation
The measure will be kept under review through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, contact David Smith by:
- telephone: 03000 593922
- email: [email protected]
Declaration
James Murray MP, Exchequer Secretary to the Treasury, has read this Tax Information and Impact Note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.