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Published 18 junio 2014
Many Trusts took transfers of properties formerly owned by Primary Care Trusts (by virtue of transfer schemes) and often did not know much about those properties or have many records in respect of them. In particular, details of the VAT position may not have been known. Some of those properties may have been intermediate leases where the Trust has a landlord above it and sublets part of the property to other NHS bodies or to commercial entities.
If the Trust's landlord charges the Trust VAT on its rent then the Trust may want to charge VAT to its subtenants to allow it to recover the VAT paid. In order for a landlord Trust to do this, it must have "opted to tax" the property for VAT purposes and notified HM Revenue & Customs using the appropriate form. However, even if the PCT made an option to tax when it was the owner of the property, the current Trust must also do so in order to be able to properly charge VAT to its tenants.
If the Trust does not charge its subtenants VAT on their rent then the VAT paid to their landlord will be an irrecoverable cost that will reduce the amount of money available for healthcare spending. However, it should be borne in mind that subtenants may not be happy at having to pay VAT on their rents if they are not able to recover the same.
Trusts will generally want to charge their subtenants VAT if they are themselves paying VAT to their landlord, and to do this they should ensure they have a valid option to tax correctly notified to HMRC. However this can increase the Trust's compliance costs and can complicate matters so the solution is not one size fits all.
London - Walbrook
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