Policy paper

VAT and the Public Sector: Reform to VAT Refund Rules

This paper outlines potential reform to the way public bodies manage their VAT affairs. The period for responses to the policy paper has concluded.

• From: HM Treasury
• Published: 27 August 2020
• Last updated: 20 July 2021 — See all updates

This was published under the 2019 to 2022 Johnson Conservative government

Documents

VAT and the Public Sector: Reform to VAT refund rules

PDF, 493 KB, 28 pages

VAT and the Public Sector: Reform to the VAT refund rules: Response paper

PDF, 228 KB, 17 pages

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Details

Under the current VAT rules, government departments, devolved administrations, the NHS and Highways England are eligible for VAT refunds under Section 41 of the UK VAT Act (1994) (Section 41).

Section 41 in its current form is unduly complex, administratively burdensome and a barrier to effective financial planning. The government is committed to improving the UK economy’s productivity and to ensuring a robust and reliable tax system, capable of generating the revenue required to support our public services but also supporting economic activity.

To achieve this, the tax system should be as simple and efficient as possible, creating the right incentives to deliver value for money and world class public services to the taxpayer.

There is therefore a strong case to reform VAT refunds under Section 41. This paper sets out HMT/HMRC internal thinking on how to improve Section 41 and invites comments to help refine the policy.

The period for responses to the policy paper closed on 19 November 2020.

Responses were received from a range of stakeholders. The summary of responses document outlines these and sets out the government’s response.

Published 27 August 2020
Last updated 20 July 2021 + show all updates

1. 20 July 2021

   Added: Summary of Responses

2. 27 August 2020

   First published.