VATGPB9500 - Government departments and health bodies: supplies to departments and health bodies

Supplies to government departments and health bodies are subject to the normal VAT rules and are generally treated the same as a supply to any other customer. However, there are two specific exceptions to this rule:

International Collaboration Defence Projects (ICDPs)

Certain supplies made in connection with 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, Chapter 13, of the Liability (Imports and Exports) Manual. [Please Note: This guidance is presently being reviewed].

A list of all current ICDP Agreements (PDF 63kb) is updated periodically, following consultation with the Ministry of Defence (MoD).

Supplies of aid to overseas governments, paid for by the Foreign, Commonwealth & Development Office (FCDO)

The FCDO 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 the FCDO is funding the carrying out of the overseas aid programme of the UK, and the supplies are delivered directly to the non-UK recipient(s), the department is making third party payments to the UK contractors, holding on account the money for the overseas government(s).

This is not grant funding, but HMRC has agreed that the UK contractor’s activities take place outside the UK, even though they are paid for by the FCDO. Such supplies are therefore outside the scope of UK VAT with the right to recovery of input VAT. It is the responsibility of the supplier to establish if the conditions in this guidance are met, and to determine the appropriate liability of the supply. If in doubt about those conditions, suppliers should contact the FCDO in the first instance.

However, this does not include supplies made by third parties to the contractor in order to aid their delivery of the overseas aid package. Supplies by third parties to the UK aid provider will be treated in the normal way.

Other international development aid programmes

Other types of overseas aid development involve detailed project work and consultancy undertaken by humanitarian aid charities on the ground in overseas countries. Where such work is paid for by either the overseas governments concerned, the international aid department of third party governments, the EU, or the World Bank, such supplies are outside the scope of UK VAT, with the right to recover of input VAT.