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HMRC internal manual

VAT Government and Public Bodies

Government departments and health authorities: Section 33E bodies: VAT refunds to non-departmental public bodies and similar public bodies

Introduction
Why was the scheme introduced?
Are bodies automatically included in the VAT refund scheme?
What do I need to do to be named by Treasury Order?
What can I reclaim VAT on?
I am registered for VAT. How can I claim the refunds I am entitled to?
I have been named in a Treasury Order as eligible for refunds but I am not registered for VAT. How can I claim the VAT refunds I am entitled to?
When can I reclaim VAT?

Introduction

Finance Act 2016 enacted a new section 33E to the VAT Act 1994 which will allow named non-departmental public bodies (NDPBs) and similar bodies to recover VAT incurred certain purchases and acquisitions (referred to in this guidance as “purchases”) made to support their non-business activities. Presently, refunds are confined to services listed in the current Treasury’s Contracted Out Services direction, please see VATGPB9700 for more information.

Why was the scheme introduced?

The policy is to encourage public bodies to enter into arrangements to share services, for example HR, training and IT.

Government departments and NHS bodies are eligible to claim refunds of VAT incurred on certain outsourced services purchased for their statutory, non-business activities under section 41(3) of the VAT Act 1994. This VAT would otherwise be irrecoverable.

There was no similar provision for non-departmental public bodies (NDPBs) and similar public bodies to recover the VAT incurred in relation to their non-business activities.

It was therefore decided to refund VAT to NDPBs and similar public bodies in the same way that it is already refunded to government departments and NHS bodies.

Are bodies automatically included in the VAT refund scheme?

No, they are not automatically included. Instead, bodies will need to be named by Treasury Order before they can claim refunds of VAT on eligible services. These bodies will be listed in VATGPB9660.

What do I need to do to be named by Treasury Order?

Because the named body will also be publically funded the legislation requires that they enter into agreements with the Treasury to adjust, where necessary, their overall funding by the amount of VAT recoverable. Therefore HM Treasury will not name a body until certain funding agreements have been reached either with the specific NDPB, similar public body or its parent Government department.

To be named by Treasury Order, the NDPBs or similar public bodies will need to approach the Treasury via their funding Government department.

What can I reclaim VAT on?

Named non-departmental public bodies and similar public bodies will be able claim the VAT incurred on the purchase of services listed in the existing Treasury Direction issued under section 41(3) of the VAT Act 1994 and published in the Government Gazettes. See VATGPB9700 for more information on the Treasury direction. If a service is not listed in the direction, then VAT cannot be recovered on its purchase under this VAT refund scheme.

I am registered for VAT. How can I claim the refunds I am entitled to?

You should claim your refund in box 4 of the VAT return. In that box you should include not only the input tax you incurred in making your taxable business supplies, but also the amount of VAT you are reclaiming under section 33E. You must also include the net value of your purchases in Box 7.

I have been named in a Treasury Order as eligible for refunds but I am not registered for VAT. How can I claim the VAT refunds I am entitled to?

For bodies which are not VAT registered a simplified claims form VAT 126 should be used. The VAT126 form is available on .

Normally, once HMRC receives your claim, they will:

  1. make your refund by BACS or payable order, and
  2. give you a unique number to quote on all claims - but this doesn’t mean that HMRC has registered you for VAT

From time to time HMRC will select claims for verification.

When can I reclaim VAT?

You may claim on a monthly basis, a three-monthly basis or on an annual basis, but in the first two cases the claim must be for £100 or more. However, VAT must be claimed within the financial year in which it is incurred. The 4 year cap applied elsewhere does not apply to this type of claim because the cost of the refund scheme is met from public expenditure, which is aligned to the funding cycle for government departments.

This means the VAT must be claimed at the latest in the final VAT return, or other claim form spanning the end of the financial year.

For example if the VAT has been incurred in financial year 2016-17 (i.e. ending 31 March 2017), it must be claimed at the latest:

  • For bodies which are registered for VAT, on the VAT return covering 31 March 2017; or
  • For bodies which are not VAT-registered, on a claim form covering 31 March 2017 and for a period ending no later than 30 June 2017.

For bodies that are registered for VAT, once you have claimed in the correct financial year any necessary adjustments to the VAT claimed should be made within 4 years of the prescribed accounting period in which the VAT was claimed.