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HMRC internal manual

VAT Government and Public Bodies

Police authorities: specific activities: covert operations

By their nature some covert police operations are subject to secrecy. These types of operation can involve officers working under cover for long periods of time and so, to minimise any risk of compromising the operations or the officers’ safety, all invoices are retained within the directorate and any postings to the general ledger are anonymised. The circumstances of the operations may involve the police concealing their identities by buying supplies in the name of a fictitious business and, on other occasions, they will deliberately avoid obtaining normal VAT documentation

These covert activities can result in significant expenditure without any evidence of the VAT element and the main accounting staff are not advised of anything more than the gross spend to an account code. In these circumstances it is acknowledged that recoverable VAT will have been incurred on costs and requests for agreed recovery rates may be sought.

A pragmatic approach is necessary. Agreement may be achieved by examining the nature of the expenditure and the suppliers for each of the account codes. Some of the expenditure categories will clearly involve standard-rated items such as hotel and telephone bills, whilst others will either not attract VAT or the VAT will not be recoverable.

The suppliers’ status must also be considered in the sense that some of them may not, either genuinely or fraudulently, be registered for VAT. For example, a bed and breakfast room will ordinarily be standard rated. But if the room is being used as part of an observation exercise in a run-down neighbourhood there is a strong possibility that VAT will not be charged.

Some account codes will include supplies with a mixture of liabilities and recoverability. In that case a weighted average may be the best approach to determine the proportion on which VAT is recoverable.