Under the current VAT rules, government departments, devolved administrations, the NHS and Highways England are eligible for VAT refunds under Section 41 of the UK VAT Act (1994) (Section 41).
Section 41 in its current form is unduly complex, administratively burdensome and a barrier to effective financial planning. The government is committed to improving the UK economys productivity and to ensuring a robust and reliable tax system, capable of generating the revenue required to support our public services but also supporting economic activity.
To achieve this, the tax system should be as simple and efficient as possible, creating the right incentives to deliver value for money and world class public services to the taxpayer.
There is therefore a strong case to reform VAT refunds under Section 41. This paper sets out HMT/HMRC internal thinking on how to improve Section 41 and invites comments to help refine the policy.