VAT Procedures FINACC-04

Transcription

1 VAT Procedures FINACC-04 1

2 Procedure Title: Supersedes: VAT Various, in the regions Description of Amendment(s): This is a consolidation of best practice in London, Anglia and Essex regions. This procedure will impact on: CCG and CSU Budget Holders Financial Accounts & Governance Department Financial Implications: Potential under or over recovery of VAT if there is lack of awareness of VAT recovery rules Financial penalties could be imposed by HMRC if inaccurate returns are submitted Procedure Area: Financial Accounts & Governance Version No: 1.0 Issued By: Author: Document Reference: Financial Accounts & Governance Department Jasmine Lee, Deputy Director of Financial Accounts FINACC-04 Effective Date: October 2015 Review Date: October 2017, or whenever significant new guidance is issued APPROVAL RECORD Committees / Groups / Individual Date Consultation: Financial Accounts Sep 2015 Approved by: Name: Harry Turner Title: Director of Finance, NEL CSU Signed: Date: This is a controlled document. Whilst this document may be printed, the electronic version posted on the NEL CSU Blue N Drive and the intranet is the controlled copy. Any printed copies of this document are not controlled. As a controlled document, this document should not be saved onto personal drives, but should always be accessed from either the intranet or the specified N drive. 2

3 Contents 1 Introduction Roles & Responsibilities Monthly VAT Returns Raising Sales Invoices VAT Considerations VAT Compliance Monitoring... 8 Appendix 1 Additional Guidance... 9 Appendix 2 Definitions and Glossary of Terms

4 1. Introduction 1.1. Aim of Procedure To ensure that the NEL CSU Financial Accounts & Governance Department follow a consistent approach in meeting the requirements of its CCG clients relating to VAT matters To ensure that the relevant NEL CSU staff are aware of the key pieces of guidance issued by HMRC and of the appropriate deadlines for the completion and / or submission of monthly and other VAT returns Background Certain NHS bodies are statutorily required to submit VAT returns at specified dates throughout the financial year. The operational responsibility is delegated by some of NEL CSU s CCG clients to their respective Financial Accounts & Governance team. However, the legal responsibility for the returns remains with the CCG NHS Commissioning Support Units (CSUs) are part of the NHS England VAT registration and are not required to submit VAT returns. NHS Clinical Commissioning Groups (CCGs) are required to calculate and submit monthly VAT returns Expert technical VAT advice is currently not within the scope of the service specification of the Financial Accounts and Governance team, although the completion and / or submission of the monthly VAT return is This procedure manual should be read in conjunction with the latest HMRC Guidance. A full listing of relevant guidance is at Appendix A list of the key definitions with a brief explanation is at Appendix 2. 4

5 2. Roles and Responsibilities 2.1. Budget Holders Irrecoverable VAT could have a significant impact on expenditure levels. Therefore, all budget holders/invoice authorisers should have an awareness of VAT rules, and to check if VAT is recoverable before authorising requisitions, non PO invoices and sales orders (if in doubt contact relevant Financial Accounts officer) 2.2. NHS Shared Business Services SBS produce the monthly VAT return working paper and prepare the VAT journal NEL CSU Where the CCG has contracted with an external company to provide additional VAT review and advice, the file will be passed to that company for review. The CSU informs SBS whether or not amendments need to be made NEL CSU submits the final monthly VAT return on-line, and keeps a copy External VAT adviser Some CCGs have contracted with an external VAT adviser, who provides the CCG and the NEL CSU with advice on recovery areas and on specific projects. Some providers also provide training Client CCGs Actual CCG involvement in the checking of the monthly return is limited, however some CCGs have requested that they have a copy of the submitted return CCGs may also be asked to provide additional detail relating to a payment / service / contract to enable a decision to be made as to whether or not the VAT is recoverable on certain invoices. 5

6 3. Monthly VAT Returns 3.1. NHS SBS Monthly Returns SBS produce the VAT return working papers, which must be issued by 25th of the month following the return that the month relates to, ie for May return, by the 25 th June This is ed to the Financial Accounts team, and shows the net reclaim / payment for the month. There will also be a list of un-reconciled items within the VAT balance sheet codes for which SBS do not hold the relevant information for clearance or inclusion in the VAT return. These items should be investigated and cleared SBS require the CSU to respond to them within 2 working days of issue of the workings, notifying them if there are any changes required. A follow up call will be made by SBS if they do not hear from the CSU. If there is no response, the journal is posted, and any corrections will happen in the following month Checking VAT Returns The return is checked by the external VAT adviser, where the CCG has entered into such a contract The relevant CSU staff should familiarize themselves with the fundamentals of the VAT regime in the NHS, so that they have a basic understanding of the rules Relevant guidance, including an HMRC Guide to VAT Returns for NHS organisations, is at Appendix Submitting VAT Returns The CSU is responsible for submitting VAT returns on behalf of the CCGs NHS organisations are mandated to submit returns on-line via the Government Gateway website, rather than by paper returns. The process for on line submission is set out in the HMRC document at Appendix A VAT return is due by the last day of the month following the month which is being reported on. For example, a VAT return for the period 1st June to 30th June is due for submission by the 31st July. NHS VAT registered bodies that submit VAT returns electronically benefit from a 7 calendar days extension to the usual time limit for rendering returns. This means that, for instance, May returns must be submitted by 7th July Keeping Copies of Submitted VAT Returns After submission of the VAT Return, a copy should be downloaded from the website and saved in the VAT folder for that CCG or for the CSU Where requested, a copy of the VAT return should also be sent to the CCG Chief Finance Officer The officer responsible for cash flow forecasting should also be informed of the amount due to be recovered from HMRC. 6

7 4. Raising Sales Invoices VAT Considerations NHS organisations may be liable to penalties & interest for instances where VAT has not been correctly charged on sales invoices. Where invoices are raised outside of the English NHS Divisional Registration, and do not have VAT charged, then reasons must be given to avoid the potential for penalties being raised If the invoice relates to any of the following areas, it should be reviewed against the HMRC guidance, or advice sought from the external VAT adviser, to verify the VAT status: Clinical Trials / Research Income Debtors in other EC Countries Grant Funding Occupational Health Services Property Rental Service Level Agreements Staff Supplies / Secondments 5. VAT Compliance Externally, VAT returns are subject to compliance checks by HMRC Internally, VAT consulting firms may be recruited to review the organisation s VAT Returns for a fee, which is sometimes based on a percentage of the unrecovered/over recovered VAT identified Payovers/recoveries from HMRC are paid directly to/from the organisation s bank account If VAT is identified retrospectively as recoverable, and exceeds 10,000 per month, a VAT 652 form should be completed. 7

8 6. Monitoring 6.1. Compliance Compliance with the procedures laid down in this document will be monitored by the Financial Accounts & Governance Department, together with independent reviews by the CSU s Internal Auditors/Service Auditors and the CCG s external auditors, on a periodic basis The Deputy Director of Financial Accounts is responsible for the monitoring, revision and updating of this document Equality Impact Assessment This document forms part of NEL CSU s commitment to create a positive culture of respect for all staff and service users. The intention is to identify, remove or minimise discriminatory practice in relation to the protected characteristics (race, disability, gender, sexual orientation, age, religious or other belief, marriage and civil partnership, gender reassignment and pregnancy and maternity), as well as to promote positive practice and value the diversity of all individuals and communities As part of its development this document and its impact on equality has been analysed and no detriment has been identified Version Control Tracker Version Number Date Author Status Comment/Reason for Issue Various November 2013 Various in London, Anglia and Essex Final 1.0 October 2015 Jasmine Lee, Deputy Director of Financial Accounts Final Consolidate best practice across the 3 regions Update for latest HMRC guidance 8

9 Appendix 1 Additional Guidance Source Date Issued Description Guidance HMRC April 2014 Overall Guide to VAT in the NHS, including COS recovery, and covering letter NHS Section 41 Guide Letter S41 Guide for NHS Apr 2014.doc HMRC October 2015 Update to above Guidance HMRC COS Guidance for go NHS England August 2015 Month 4 Reporting Guidance - Brief guide to VAT recovery in the NHS, including bodies in NHS VAT registration division NHS England M VAT Guidan HMRC How to register for on line filing of VAT returns, and how to file a return on-line HMRC Guide to registering for On Li 9

10 Appendix 2 Definitions and Glossary of Terms 1.1. Output Tax VAT due to HMRC on taxable supplies of goods and services Input Tax The law allows VAT registered organisations to reduce the amount of output tax they pay to HMRC by the amount of VAT they have been charged by their suppliers in making their taxable supplies. The Input Tax is the amount charged to the NHS organisation VAT Rates This is the percentage of Input or Output Tax charged on the supply of goods and services provided or purchased. Vat registered organisations must charge VAT at the standard rate on all goods and services supplied, unless they fall into one of the following categories: Reduced Zero rated Exempt from VAT Outside the scope of VAT There are currently three rates of VAT: Standard rate currently 20 per cent Reduced rate currently 5 per cent A reduced rate of VAT applies to some goods and services - including items such as domestic heating fuel and children's car seats. Sometimes the reduced rate only applies in certain circumstances, or it may depend on who the customer is. Zero rate this is not the same as exempt or outside the scope of VAT. There are some goods and services that are zero-rated. This means that they're taxable for VAT, but the VAT rate is zero per cent. If you sell zero-rated goods or services, you can generally reclaim VAT on any purchases that relate to those sales. This is in contrast to if you sell only exempt goods or services, where you cannot normally reclaim VAT on your purchases Exempt Supplies These are supplies of goods and services not subject to VAT. Exempt goods and services are not taxable for VAT, so if you supply them, then: you don't charge any VAT on them you don't include them in your VAT accounts you can't normally claim back the VAT on related purchases Goods and services that are exempt from VAT include: insurance (but there is an Insurance Premium Tax (IPT) that may apply instead) some services from doctors and dentists some types of education and training If you supply only exempt goods or services, you cannot register for VAT and you cannot charge VAT. If you buy exempt goods or services, you aren't charged VAT so there is none to claim back. 10

11 If you sell some exempt goods or services and some goods or services that are taxable for VAT, your business is 'partly exempt' and you will only be able to reclaim VAT related to the VAT taxable goods and services you sell Goods and Services Outside the Scope of VAT Some goods and services aren't covered by the UK VAT system at all - they're outside the scope of VAT. Goods and services that are outside the scope of UK VAT includes anything you: sell (or otherwise supply) when you're not registered for VAT - and you don't need to be registered buy or sell outside the European Union (EU) sell (or otherwise supply) but not as part of your business - for example, if you occasionally receive income from sources such as leisure activities or hobbies buy and sell for your own personal use, such as a hobby donations to charity freely given by a business where the giver does not receive anything in return statutory fees and services, e.g. MOT testing, congestion charge tolls for bridges, tunnels and roads operated by public authorities low cost welfare services provided by charities Supplies between organisations within the English NHS VAT division are also outside the scope of VAT, and should not be charged or charge VAT on transactions to each other eg CCG to CCG transactions; CCG to NHS Trust transactions would not be subject to VAT It should be note that the Department of Health itself is not within the English NHS VAT divisional registration, and therefore invoices raised by CCGs / CSUs / NHS England should include a VAT charge. Invoices received from the DoH should have a VAT charge A useful diagrammatical wheel of the organisations within the NHS VAT divisional registration is at Appendix 1. (Source is NHS England) 1.6. Contracted Out Services (COS) Over recent years, there has been a move toward the contracting-out of some nonclinical services which were traditionally performed by nonclinical NHS employees. Examples include services provided by caterers, cleaners, porters and estates New contracts are generally awarded following competitive tenders, usually involving outside private contractors bidding against existing in-house teams on the basis of quality and price. For this process to be successful there must be a level playing field in terms of risk between the in-house bids and the external contractors. Initially this does not seem possible, as external contractors have to include VAT in their tender price, whilst in-house bidders do not. This would leave a difference in price between the two bids, of the standard rate of VAT To overcome this, a principle was established of allowing the NHS to recover VAT on a designated range of contracted-out services The range of contracted-out services is defined within the Treasury Directions. VAT recovery can only take place when the service is on the list of eligible services published in the most recent Treasury Direction (see Appendix 1). 11