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HMRC internal manual

VAT Government and Public Bodies

Government departments and health authorities: supplies to departments and authorities

Supplies to government departments and health authorities are subject to the normal VAT rules and so are generally treated the same as a supply to any other customer.

There are two specific exceptions to this rule:

  • Certain supplies made in connection with International Collaboration Defence Projects (ICDPs) are zero-rated. The relief only applies to supplies made to or received from either:
    • an overseas authority or body responsible for managing a qualifying project, or
    • an overseas authority, body or trader under direct contract to a UK or overseas authority responsible for managing a qualifying project.

Further information about the VAT treatment of ICDPs can be found in Part B of the Liability (Imports and exports) manual (V1-7)(Word 52KB). Annex B of that guidance contains a list of all current ICDPs and the scope of recovery. This list is updated periodically following consultation with the Ministry of Defence (MoD).

  • The Department for International Development (DfID) is the Central Government Department charged with the formulation and delivery of the UK Government’s international aid programme. It carries this out by funding various bodies, including humanitarian aid charities, to undertake detailed project work and consultancy on the ground in the overseas countries concerned. Where DfID is funding the carrying out of the overseas aid programme of the UK, the supplies delivered directly to the non-UK recipient are treated as being made to that non-UK recipient and not to DfID. Such supplies are therefore outside the scope of UK VAT. However, this does not include supplies made by third parties to the contractor in order to aid their delivery of the overseas aid package.

Please note:

Historically, there were special arrangement for exports on behalf of the MoD which were excluded from zero rating. However, this ended officially on 31 December 2004 and any residual questions about this should be referred to VAT Supply Team (see VATGPB1600).