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HMRC internal manual

VAT Government and Public Bodies

Government departments and health authorities: Contracted Out Services (COS) Headings: COS Heading 71 - Welfare services

This Heading refunds VAT incurred on outsourced welfare services supplied only to staff members of the Government Department or health authority.


  • Staff support services
  • Counselling services provided to staff, for example in the aftermath of major incidents
  • The provision of care, treatment or instruction designed to promote physical or mental well being


However, there are two exceptions to the staff only rule, where the Government Department or health body also has a duty of care for other individuals:

  • Prison inmates, and
  • Hospital inpatients

In these instances, the definition of ‘welfare’ has a wider application, and therefore includes the provision of social work where necessary. Nevertheless, this recovery is only allowable to the point that the recipient is still an inmate or inpatient. Once the recipient ceases to be such, any continuing services supplied to them, and paid for by the Government Department or health body, ceases to be recoverable and is simply an overhead of that organisation

Additional information

Many of these educational welfare services will be exempt from VAT so there will be no VAT to recover.