On 3 December 2014, George Osbourne announced in his Autumn Statement new VAT rebate schemes for hospices, search and rescue charities and air ambulances.
Currently such organisations cannot recover VAT on their expenditure, even though they essentially provide the same services as those provided by the NHS and other Government funded agencies such as the Coastguard.
It might be that the refund scheme for charities will be implemented by additions to Section 33 of the VAT Act that will allow recovery of VAT on non-business activities undertaken by local authorities and similar specified organisations. It is also probable that search and rescue charities and air ambulances will be included within these provisions. This would allow the recovery of VAT on costs attributable to their non-business activities but not in relation to any exempt business income.
Further details are awaited on how hospices are going to be refunded. One thought is that the refund scheme currently available to NHS Trusts could be extended to hospices. Under this scheme Trusts are allowed to reclaim VAT on a list of specified "contracted out" service. The list is published by HMRC annually and hospices could be added to the organisations entitled to take advantage of these provisions. Alternatively, there could be a completely separate rebate scheme similar to those available for Listed Places of Worship and Museums and Galleries.
These are much welcomed announcements and the Government has indicated they could be worth as much as £9 million to those eligible. However, the scope and extent of the rebates are yet to be announced. There is also a possibility of a challenge to the UK Government’s decision if these rebates are considered to be ultra-vires to EU Law.
It is intended that the rebate schemes will be available from 1 April 2015 and we will await the details with interest.
For more information, please contact Alan Pearce of your usual Blick Rothenberg contact.