VAT focus: VAT, public bodies and outsourcing

The VAT treatment of public bodies is complicated, inconsistent and outdated. When dealing with public bodies, there is often contractual uncertainty over the burden of VAT. The UK leads the way in outsourced services, but VAT should not be a block to this means of service provision. The European Commission has accepted that current rules act as a disincentive to outsourcing and inhibit commercial operators from offering competing services. It has proposed five options for reform, some of which offer piecemeal solutions and risk perpetuating complexity and distortions in the market.