HMRC Warns Against VAT Grouping Tax Avoidance by State-Regulated Care Providers

• State-regulated care providers are using VAT grouping to gain tax advantages.
• The scheme involves changing VAT liability from exempt to taxable for supplies to local authorities and NHS Integrated Care Boards.
• This allows care providers to recover VAT on costs that would otherwise be non-recoverable.
• HMRC views these arrangements as tax avoidance.
• VAT exemption applies to welfare services supplied by charities or state-regulated care providers.
• The scheme involves inserting an unregulated care provider into the supply chain.
• Contracts are transferred to the unregulated provider, which sub-contracts services back to the regulated provider.
• Supplies by the unregulated provider are taxable at the standard VAT rate.
• The VAT group can recover VAT on costs due to the grouping structure.
• VAT charged to local authorities or NHS ICBs is recoverable under specific sections of the VAT Act.

Source: gov.uk

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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