VAT changes for OFSTED registered Supported Accommodation Providers

If you are a Supported Accommodation Provider who recently registered with OFSTED, your VAT position may have changed.

All providers of supported accommodation in England were required to apply to register with OFSTED by 28 October 2023. They also had to adhere to mandatory national quality standards published by the government.

A supported accommodation provider is anyone who accommodates looked after children and care leavers aged 16 and 17 years old.

Those who have now registered, may have seen their VAT position change. Becky Hayes, Partner, and Head of VAT at Westcotts explains.

Why might this change your VAT position?

Typically, welfare services providing care or protection for children and young people will be exempt from VAT under certain conditions. For example, when they are provided by state regulated private welfare installations.

Prior to 28 October 2023, services would often be supplied by unregulated providers. Providing supported accommodation was not a service that was required to be state regulated. This meant that the income from providing supported accommodation did not meet the conditions for exemption. Therefore, they were ‘taxable supplies’ and subject to VAT (where the provider is VAT registered).

Unregulated providers could reclaim VAT incurred on expenses which was a benefit of VAT registration and making taxable supplies. These expenses were directly linked with making the taxable supply of supported accommodation.

These supplies are now required to be state regulated by OFSTED therefore they may meet the conditions for VAT exemption. Where conditions are met, it will mean VAT should no longer be charged on the regulated supply of welfare services. Consequently, there is no entitlement to recover VAT on related costs (subject to partial exemption calculations).

What can you do?

Providers who have become registered with OFTED may no longer have an entitlement to reclaim VAT. Thus, they may be charging VAT in error.

It is important to review your supplies to see if you meet the conditions for exemption. Should you meet the conditions, you will also need to review your entitlement. This is to ensure that you stay VAT registered and keep your VAT recovery position.

Westcotts’ VAT Team

At Westcotts, our VAT Team can help providers understand their VAT position. They can also provide practical advice to minimise irrecoverable VAT costs as a result of this change. Furthermore, if VAT has been incorrectly charged or claimed, they can help to mitigate any risks of future assessments from HMRC.

Do you need a helping hand or personalised advice with regards to VAT? Becky Hayes, Partner, and Head of VAT at Westcotts, can help. Send an email to becky.hayes@westcotts.uk or call 01392 288555. Alternatively, find the contact details for your local office on our Contact page.