Gingerbread VAT, and how it relates to the NHS
Gingerbread biscuits offer a timely reminder: VAT recovery in the NHS isn’t always straightforward. Sophia Harley, Business Development Manager at Liaison Financial, explores how the amount of icing on the festive biscuit decides its VAT rating...
11 December 2025
At this time of year, it’s common to see gingerbread figures – but do you know how they relate to VAT?
Take a closer look at your biscuit… how much icing does it have on it?
The amount of icing on your biscuit decides if it’s zero-rated or standard-rated for VAT. And the same principle applies to major NHS decisions on capital projects and non-pay spend.
The breakdown
The gingerbread man on the left has three blobs of icing (two eyes and a smile).
This means it’s still considered a basic food item, so it’s zero-rated for VAT.
However, the gingerbread man on the right has more icing (eyes, smile, buttons, and fancy squiggles!).
Now it’s a standard-rated luxury!
Once it goes beyond basic, it is considered decorative or indulgent, and that’s where VAT kicks in.
What does this mean for NHS finance teams?
In the NHS, VAT recovery on goods and services is not always black and white, and can hinge on whether something is classed as a core necessity or a non-essential extra.
You may see this in:
- Capital projects, where a particular finish or feature may or may not be necessary for clinical use.
- Facilities and estates, where service elements may or may not qualify.
- Medical staffing with tribunal cases like Northumbria, where an agency supplies staff rather than direct patient care (i.e., where the supply is deemed staffing, not medical services).
Just like with the gingerbread, a small difference in what’s included can change the outcome entirely.
Why does it matter?
With capital spend under pressure and recoverable income more important than ever, NHS finance teams need to be asking themselves:
- Are we maximising VAT recovery on what we’re already spending?
- Do our contracts reflect that?
- Have we revisited areas that could now qualify?
How can Liaison help?
We don’t just spot the extras on gingerbread men… our VATplus re-reviews help NHS organisations to recover VAT that may have been missed, with minimal internal lift.
VATplus adds an extra layer of assurance, helping recover legitimate VAT that might otherwise go unclaimed, and supporting compliance ahead of HMRC’s annual deadline. Each year, we recover over £14million in additional VAT, on top of what incumbent advisors have already secured.
To find out more, please get in touch with Liaison Financial’s VAT experts.
