HMRC’s progress on a new COS 14 heading

21 January 2019

With Matt Hancock’s focus on driving digital healthcare, the COS 14 heading relating to computer services supplied to the specification of the recipient has been under review. This heading applies to services supplied to a government department or NHS body in its procurement of an IT system to its own specifications or to specifications dictated by the Government or NHS.

This means that the system/software should not be simply designed and built in order to meet certain perceived needs. The specifications must have either been specifically dictated to the supplier or be of such specific requirements that it would have no application outside of the Government or NHS. For instance, if a system can be used by private healthcare providers, it would not meet the rule and recovery would not be possible. The only exception is telephony, which is always excluded.

Following meetings with various stakeholders, HMRC and HM Treasury are considering a proposal from the Tax Centre of Excellence which will simplify the heading considerably, and which looks likely to work for both government departments and the NHS.

If agreed in principle, HMRC will circulate draft guidance to the Committee when ready. HMRC clarified, however, that any revised COS Heading 14 will only apply to new submissions from a date to be announced, with all previously submitted cases being dealt with under the old heading.

No further updates have been released by HMRC prior to this Liaison Financial update being released.

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