Advice please - NHS Contracting (via agencies) and VAT

[hiredhands]

Hello all

I recently secured a 6 month non-clinical contract through an agency in an NHS Foundation Trust.

Having agreed the price, the client has now come back to the agency and stated they misunderstood the arrangements around claiming VAT back, stating that VAT can only be claimed back by NHS organisations on clinical interim positions.

Can anyone clarify if this is definitely the case? My day rate is going to suffer as a result if so - I think this is something that the agency should have made explicitly clear at the outset so that the client could set their budget accordingly, but it doesn't seem to have happened.

Any help much appreciated!

hiredhands

[NotAllThere]

Is the plan to reduce your fee, so instead of e.g. £400 + VAT, they pay just £400 including VAT?

[Maslins]

Yuck. Client of ours had a similar thing very recently. Problem is nobody can really decide whether locum doctors/similar are providing medical services (exempt) or providing labour services (VATable).

Two agencies, one insisted was VATable, the other insisted wasn't.

Not quite the same situation, but it's a horribly grey area...happens a lot with VAT (eg the classic "is a jaffa cake a cake or a biscuit").

Possibly you can simply not charge them VAT, under the argument you believe you're selling medical services? Unsure how viable this is given what you do.

Otherwise does sound like a commercial argument, as to whether you're worth £480/day to them (based on NotAllThere's numbers) so they take the VAT hit, or whether you do by making your invoice £333.33+VAT.

[hiredhands]

Hi both

Thanks very much for your advice. I suspect it is the agency trying to manage cost, as the client will probably be unwilling to pay 20% on top of what is being charged as both my day rate and agency fee if they cannot claim it back (it'll add about another £2000 to their monthly bill).

I haven't signed any right of representation in regards to the introduction, so wondering if it is worth going direct to the client and explaining the current situation, as it doesn't look like it is going to get resolved satisfactorily otherwise.

[LisaContractorUmbrella]

Have a look at section 6.4 here https://www.gov.uk/government/public...-professionals

[DaveB]

For what it's worth I'm working for an NHS body at the moment (non-clinical) and my invoices all include day rate + VAT and has never been questioned.

[Sausage Surprise]

For what it's worth I'm working for an NHS body at the moment (non-clinical) and my invoices all include day rate + VAT and has never been questioned.

Likewise...done loads of IT gigs with the NHS and VAT was always payable

[TykeMerc]

Your contract is actually with the Agency, not with the NHS body directly?

If that's the case then I believe you're obliged to charge VAT no matter what, there's no kind of exemption in place and just because the NHS can't reclaim the VAT doesn't mean they don't have to pay it to the Agency, that bit however isn't something you have any control over.

I'd tell the Agency that it's their problem, not yours and if they don't like it then beat them over the head with the contract.

I understand that various medical type professionals are unable to VAT register, but their suppliers have to so the likes of Dentists pay VAT to suppliers, but can't charge it.

[Danglekt]

The VAT has to be charged, the point they are making is the NHS Trust cant pass the VAT on as other companies do as they don't sell anything, so nothing to NET it off against, so haven't budgetted for the effective 20% increase in project resource costs.

Very common issue that I have seen a lot

Up to you to either swallow the 20%, argue the toss or move on.

[TykeMerc]

The VAT has to be charged, the point they are making is the NHS Trust cant pass the VAT on as other companies do as they don't sell anything, so nothing to NET it off against, so haven't budgetted for the effective 20% increase in project resource costs.

Very common issue that I have seen a lot

Up to you to either swallow the 20%, argue the toss or move on.

Nope, it's the Agents problem, it's them charging the NHS. Now if the Agent wants to terminate the contract that would actually be quite fun to take to court, it's very easy to prove a financial loss.