This
long expected measure, announced earlier this year, will also
affect other businesses which cannot recover VAT in full -
such as companies in the health, education, financial and
charitable sectors.
On
27th March 2008, HMRC put out a document reviewing the
responses received to their consultation on the changes. It
was hardly a consultation, given that the decision had already
been taken to withdraw the concession!
HMRC
do accept that those sectors indicated above will be affected.
They estimate that the ‘revenue yield’ in the first year
will be £125million. This is money which will be charged as
VAT, but will not be recoverable. That is a substantial
additional cost to those sectors affected.
Affected
businesses have a year to consider their position. In some
sectors, particularly health, there will be an opportunity to
consider whether the supply of staff should be treated as
VAT-exempt in any case. In this case, the contractual position
could be changed to benefit from the exemption under Sch 9,
Group 7.
So
