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Public sector VAT refunds: CIOT responds

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The CIOT has responded to the Treasury policy paper VAT and the public sector: reform to VAT refund rules on proposals to reform the operation of VATA 1994 s 41, which allows limited input tax recovery for public sector organisations.

The insitute supports the full refund model (FRM), which extends the scope of s 41 to allow organisations to recover VAT on goods and services in respect of their non-business activities, particularly in simplification terms for s 41 organisations dealing with contracted-out services.

The CIOT believes that partial exemption should be considered as part of proposals around the full refund model, to bring the VAT recovery position for government departments more closely in line with that for other statutory authorities (in s 33).

The CIOT encourages the Treasury to consult with private sector suppliers providing outsourced services which may find themselves with inequitable VAT treatment under the FRM, to ensure that examples of distortions of competition rules are raised and considered fully.

Revenue & Customs Brief 19/2020 confirmed the government’s intention to remove the VAT recovery advantage under s 41 for government departments which supply cars to their employees under salary sacrifice arrangements.

Issue: 1513
Categories: News