Hospices VAT refund scheme

The VAT People has many years of experience in helping hospices to navigate through complicated VAT processes, including the refund scheme, which was rolled out following the 2015 Budget announcement.

Our qualified team of specialists know all too well how difficult operations for hospices can be, and we are dedicated to helping you to increase your understanding of VAT so you are able to take advantage of any available reliefs and discounts.

Contact us by calling 0800 077 4604, or fill out an online enquiry form and we will get back to you at a more convenient time.

About the refund scheme

From 2015, palliative care charities were given the chance to recover VAT on non-business activities, which have been funded by donations or public funds. The scheme is intended to benefit palliative care charities providing services for both adults and children.

Organisations that are not charities may not benefit from the UK-wide scheme, which means that the subsidiaries of hospices may also not benefit. Similarly, organisations that are not hospices, but provide some palliative care, such as a nursing home, cannot benefit.

What can hospices recover?

The refund scheme was introduced to cover the costs incurred on non-business activities. Hospices can continue to recover VAT on their business activities, and will still not be able to recover the VAT on their exempt activities.

Since the majority of activities for charitable hospices are classed as non-business, the scheme ensures they move away from a position of being able to recover very little of their input VAT to being able to recover the majority of their VAT.

Hospices can also recover more of the money they spend on overheads than before the scheme was introduced.

How do hospices benefit?

For hospices to benefit from the refund scheme, those that are already VAT-registered can reclaim costs through their VAT returns. Those that are not can submit separate claims forms to HMRC.

In order to benefit, hospices need to carry out the following things:

  • Differentiate between non-business activities and those that are exempt from VAT

  • Identify a method of apportioning VAT on costs between non-business and business activities (which should be formally agreed with HMRC)

  • Implement a VAT coding structure that will allow it to allocate VAT incurred on expenditure to the various VAT recovery categories

How do I know if my income is taxable, exempt or non-business?

 If you are in any doubt regarding whether income is taxable, exempt or classed as non-business, expert advice is recommended. The main issue hospices are likely to experience is government funding, and whether it constitutes as non-business or exempt income.

The government income is considered to be a grant (although there may be some conditions attached), whereas then the income will be classed as non-business, meaning hospices are then able to recover the input VAT.

The decision as to whether a form of income will be considered non business or exempt will be dependent on the exact terms of the agreement. In general, if the funding relates to a specific named individual or care plan, it is likely to be classified as exempt, whereas if it simply has some general conditions, it is likely to be classified as non-business.

Hospices are advised to seek advice from a professional when it comes to deciphering this complicated process - and The VAT People is here to help.

Get in touch

Speak to the experts by contacting The VAT People today. Our highly experienced and professional team can help with any aspect of VAT, and we are dedicated to helping all types of organisations.

Contact us by calling 0800 077 4604, or fill out an online enquiry form and we will be in touch.

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