In December 2019 the Government announced that from April 2020 all NHS trusts in England would be expected to provide free car parking to certain groups, namely blue badge holders and outpatients attending hospital frequently to manage long-term conditions. Free parking was also to be offered at specific times for parents of sick children staying overnight in hospital and staff working night shifts.
This announcement was met with some confusion by trusts in how to implement and administer this measure. Events have since been overtaken by COVID-19 with some trusts allowing some form of free parking to staff and visitors for the duration of the crisis. The introduction of free car parking will have the following consequences:
- A reduction in the level of taxable business income, thus reducing the overall level of VAT recovery on residual expenditure incurred by a trust. This is something that your Liaison Financial VAT advisor will evaluate during the course of their annual review of your business activities and partial exemption calculation.
- A potential restriction on the ability to reclaim VAT incurred on expenditure directly related to the operation of car parks.
- A downward adjustment to input VAT reclaimable car park works that fall within the scope of the Capital Goods Scheme (CGS) This would apply to capital expenditure on car parks exceeding £250,000 and could result in a pay-back of VAT to HMRC over the 10-year life of CGS.
The impact on VAT recovery will vary from trust to trust depending on how trusts are implementing the Government’s December 2019 announcement or on what temporary changes each trust has introduced because of COVID-19. If you would like to discuss the VAT consequences relating to your trust, please contact your Liaison Financial VAT advisor.