Technical review – April 2019

The Treasury is exploring a fiscally neutral reform to the VAT refund scheme for NHS bodies and central government to reduce the complexity of the current approach. A policy paper will be published in the coming months. Section 41 of the VAT Act 1994  allows NHS bodies to reclaim the VAT they have incurred on certain outsourced services. This was introduced to remove a disincentive to outsourcing, resulting from irrecoverable VAT costs. This is administered through a list of services eligible for VAT refunds. However this has led to disputes over interpretation and is viewed as complex and inefficient. The Treasury is exploring a change to allow refunds to NHS bodies on all goods/services purchased to support non-business activities. This would simplify the system but require an adjustment in departmental budgets to be fiscally neutral. The Treasury is currently gathering data to inform its proposals.



The HFMA has issued an update on its briefing on accounting for leases in the run-up to the application of IFRS 16 Leases. The update reflects the recent Financial Reporting Advisory Board’s November decision to defer implementation of the leasing standard for the public sector until April 2020. The delay reflects the recognition that IFRS 16 does not align with the European System of Accounts 2010 used to prepare the national accounts. The briefing says that further guidance from the Treasury on the implications for national budgets and accounts is due imminently.


New guidance from NHS England and NHS Improvement on the commissioning for quality and innovation schemes for both clinical commissioning groups and prescribed specialised services sets out a ‘radically different approach’ for the new year. CQUIN schemes for 2019/20 are being reduced to 1.25% and there will be a maximum of five indicators for each CCG contract drawn from 11 areas of best practice – such as adherence to national antibiotic guidance and staff vaccinations.  National indicators must be used where relevant. However, if insufficient relevant indicators are available, CCGs should offer local CQUIN indictors.



The HFMA has published a draft briefing looking at the accounting and valuation issues around property, plant and equipment. The briefing covers the initial and subsequent measurement of purchased assets and a table sets out the valuation basis for different types of asset and the circumstances in which the asset is being held. The briefing also covers frequency of valuations, modern equivalent asset valuations, the role of management and use of valuation experts. The briefing was published in draft format to be available to support practitioners over the year-end. However, a final version will provide more information on capitalisation of building projects and subsequent expenditure and accounting for depreciation (see page 29). Comments on the existing draft and on areas to be covered in the final document should be sent to [email protected]