Trust forced to pay £300k VAT over Virgin Care contract

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Burton Hospitals FT paid £300,000 in VAT related to “prime provider” contract awarded to Virgin Care by East Staffordshire CCG
The trust queried the VAT charges with HMRC but was told it must pay them
Trust would not have incurred charges had services been contracted directly by CCG

A trust in Staffordshire has been forced to pay hundreds of thousands of pounds in VAT charges due to a controversial “prime provider” contract commissioned by its CCG.

Burton Hospitals Foundation Trust was made to pay £300,000 in VAT at the end of 2016-17, in relation to services it was contracted to deliver by Virgin Care, as part of a “prime provider” contract with East Staffordshire Clinical Commissioning Group.

In March 2015, Virgin Care was awarded a seven year contract worth £270m to act as an “integrator” of community services in the area. As part of the contract, which went live in May 2016, the company directly commissions services from Burton Hospitals.

Trust board papers said it had to find provisions of £300,000 in March, which were previously not budgeted for, due to “unresolved HM Revenue and Customs VAT issues [with] regards [to the] Virgin contract”.

A source close to the situation told HSJ the trust had queried the charges with HMRC but it ruled that the trust was required to pay the VAT under current legislation.

HSJ understands the trust would not have incurred the charges if services had been commissioned directly by the CCG rather than Virgin Care, which is outside the group of NHS organisations that can recover VAT costs.

For 2017-18, the trust has predicted it will need to pay up to £400,000 in VAT.

The issue could also affect other trusts that are commissioned by Virgin Care as part of the contract.

Board papers from January said the trust previously raised an invoice to East Staffordshire CCG to “seek redress” over the potential VAT charges but both the CCG and Virgin Care “[disputed] that the invoice should be picked up by them”.

In April, HSJ reported that the CCG was in dispute with Virgin Care over “contractual claims” the provider had made for variations to the contract.

In 2014, the CCG told HSJ it intended to pursue the prime provider contract to tackle its predicted deficit of £10m by 2018. Tony Bruce, the CCG accountable officer, also previously said the contract was required because commissioners did not have the capacity to deliver the integration of services.

Burton Hospitals FT has been approached for comment.