back to article HMRC dishes out tax rewards to GOV.UK... for inking deals with MEGABUCKS SIs

Departments using large system integrators are eligible for VAT refunds from their IT, while those purchasing off-the-shelf "cloud" services will be entitled to nada, according to the latest draft HMRC guidance. The guidance appears to directly contradict moves by the Cabinet Office to get departments to buy cheap, …

  1. Anonymous Coward
    Anonymous Coward

    Typical Government.....

    So let me understand, Tax breaks apply for custom products from companies large enough to easily buy vacation homes for the client and small companies that could really use a tax benefit to make them more competitive get no tax deduction status benefit just because they use an off the shelf product to do the exact same thing at 1/3rd the cost. (it's probably the same product with a custom splash screen)

    Scum sucking political hacks and their minions should ALL burn in HELL. No wonder taxes are so high. Even smaller wonder that our politicians are so high.

  2. Anonymous Coward
    Anonymous Coward

    Does this mean...

    Business users of things like Office 360 can't recover VAT?

    1. Ben Liddicott

      Re: Does this mean...

      No, nothing to do with businesses. This is purely an internal government accounting thing.

  3. Ben Liddicott

    This is Government refunding Government - nobody saves any money

    This guidance doesn't affect businesses at all.

    The article is unclear, but this is talking about whether **government departments** can get a rebate for VAT paid on various purchases. Government "services" are not VATable so they are not able to reclaim VAT on inputs against the VAT they (don't) charge in the same way as businesses. The purpose of the rebate is to ensure that outside suppliers aren't placed at an automatic 20% cost disadvantage over using internal staff for the same job. I.e. it is not so much to encourage outsourcing, as to create a level playing field for it.

    As such only outsourced services which substitute for employing internal staff are supposed to be VAT-rebate-able.

    Hence bespoke software = Yes, renting Cloud Servers = No. Outsourcing systems administration ought to be Yes, but I haven't read the guidance. Of course cloud servers come with a sysadmin element, so if I was a supplier I would rewrite my contract to break that out as a separate purchase so as to remove the pricing disadvantage as intended by the rules.

    (Remember VAT is paid on sales, but reclaimed on VATable inputs. So in net-net it is only actually paid on NON-VATable inputs, which are: Capital costs (i.e. profits/your mums pension), Staff costs (i.e. labour/wages), and Imports (i.e. foreign capital and foreign labour)).

    1. Sirius Lee

      Re: This is Government refunding Government - nobody saves any money

      Take an up vote. This comment should have been the article.

    2. Roland6 Silver badge

      Re: This is Government refunding Government - nobody saves any money

      Good comment Ben and agree suppliers will be restructuring bids and pricing to reflect the changes.

      I think that things aren't quite as clear cut with respect to cloud services as the El Reg article makes out. Remember the government is running it's own cloud service, which by definition has been developed to satisfy the needs of government. Hence I anticipate that services hosted on gCloud will be reclaim the VAT, but services hosted on commercial clouds will not. Hence for example the UK Parliament in deciding to use Office 365 (an "off-the-shelf Internet 'Cloud' IT infrastructure) wouldn't be able to reclaim VAT, whereas another department using the 'bespoke' Office 365 for gCloud would be able to.

      However, I'm unsure as to why this article is being published (with the angle it takes) as topical news at the present time. The draft guidance has been out for some months [see: http://www.bbvat.co.uk/vat-news/2014/8/5/hmrc-draft-cos-guidance.html ] and according to this source the guidance is unlikely to be finalised until 2015 [see: http://www.bbvat.co.uk/vat-news/2014/10/14/hfma-vat-technical-meeting-september-2014-vat-update.html ]

  4. frank ly

    A key question for suppliers:

    ("... and (iii) use of the infrastructure is for non-business activity.")

    Which games are bundled free with the equipment?

  5. NeilMc

    Are the bold text excerpts direct quotes?

    If so then that just hammers another giant nail in the credibility of GOV.uk.

    Apart from the first paragraph reading "refundable under where i)".......... is that supposed to be refundable underwear... or edible underwear..... these people cannot read write or clearly comprehend English. After that all bets are off.

    The second paragraph is no better "Typically this type of universal software is provided as part of a large IT contract and is be integral"......... is be integral.......WTF

    Is this a case of HMRC now outsourcing policy guidance to suppliers in countries for whom English language is a third / fourth language.

    If they cannot be bothered to write and communicate in plain, accurate and easy to comprehend English then that tells us all we need to know about the poor state of HMRC and the UK Civil Service.

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