Question to the HM Treasury:

To ask His Majesty's Government when they expect to publish the conclusions of the review of VAT for public bodies under Section 41 of the Value Added Tax Act 1994.

Under Section 41 of the VAT Act 1994 Government departments, NHS Trusts and some wider public bodies can claim VAT refunds on certain outsourced services. Their remaining irrecoverable VAT is funded through Departmental Expenditure Limits. The Government is exploring reforming this system into a ‘Full Refund Model’ which would enable Section 41 bodies to recover VAT on all goods and services incurred during the course of non-business activities.

To ensure the reform is fiscally neutral, the departmental budgets of Section 41 bodies must be adjusted by an amount corresponding to the additional VAT they will be refunded for. HM Treasury is currently analysing data provided by Section 41 bodies on their irrecoverable VAT and will set out the next steps to the reforms in due course.