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HMRC internal manual

VAT Government and Public Bodies

Government departments and health authorities: Contracted Out Services (COS) Headings: COS Heading 1 - Accounting, invoicing and related services

This Heading concerns the outsourcing of all, or part, of an accounts department although it also covers the procurement of the type of services which would have been undertaken by an accounts department. The exclusions are functions which either had to be procured from external accountants or have since evolved as services supplied by external accountants. It would not include VAT incurred on external audit fees as, by their very nature, they would never have been performed in-house so could not be contracted out.


  • Accountancy services which include general record keeping, invoicing and preparation of tax returns and other related supplies
  • Preparation of financial accounts and/or statements and accountancy advice


  • External Audit fees
  • Tax planning advice - for further information refer to VATGPB9450 

Additional information

Internal audit reports - these deal with efficiency and any VAT incurred can be recovered under Heading 52. Recovery is allowed as government departments have never been allowed to do their own auditing it has to be done by another body - now the National Audit Office.