Many care providers will know that, by restructuring their contracts in respect of services provided to publicly funded clients, VAT paid on costs associated with those services can be claimed back, with an overall reduction on operating costs.
But contract restructuring goes far beyond day-to-day business administration; contract restructuring is a project, and it needs careful project management.
“Contract restructuring can be complex, with many ‘moving parts’ involved with planning and implementing the change, and then managing the ongoing process,” says Jock Waugh, managing director of Kieran Lynch, a specialist firm which has helped dozens of care providers restructure their VAT arrangements for more than a decade.
“VAT restructuring needs to be done correctly – building relationships with CCGs and local authorities is a key factor, as is attention to detail with regard to invoicing and securing payments. Also, given that retrospective claims may be made for periods of up to four years, it really needs a team with the resources, VAT knowledge and experience to manage the contract restructuring. Again, the detail needs to be gone into; who were the services users for which VAT can be retrospectively claimed? What were the periods of occupancy?
“But managing the changes to VAT is just a part of what is required for contract restructuring to be successful, I would say that knowing the VAT rules and mechanisms is only about 20% of the task; the bulk is about building relationships and managing how the provider interfaces with HMRC and funding bodies. Then there is the whole billing process; communicating with contract managers and Shared Business Services (the NHS’s centralised payments hub).”
For those providers of elderly and specialist care whose client base has a significant proportion of publicly funded clients, and who may be struggling to stay in the black in the face of escalating staffing costs and the impact of inflation on operating costs across the board, contract restructuring is a proven route to improving business efficiency.
But it needs a skilled and experienced team to arrange both the restructuring and ongoing management.
“The benefits are clear,” says Jock. “But it needs to be done properly – it is simple for the operator if they bring a specialist team on board.”
Thinking about restructuring for VAT recovery? Contact Kieran Lynch on 0114 262 2127.