The Treasury has now formally launched its consultation asking for stakeholders’ views on proposals for a major reform of the current VAT refund scheme for public bodies.

Most activities of public bodies, such as government departments and the NHS, are outside the scope of VAT, either because they are non-business in nature and/or provided as a statutory obligation. Under normal VAT rules, this would mean the public body would not be entitled to recover VAT incurred on these activities.