Sharpe Pritchard and PSTAX, leading providers of legal and taxation services to local authorities, announced today the launch of a new joint due diligence service for care contract restructuring.
The service will assist local authorities in conducting the essential due diligence checks to ensure that a care provider’s proposals do not present unacceptable risks for VAT and other regulations.
By instructing Sharpe Pritchard and PSTAX to carry out the due diligence exercise, local authorities can agree to an appropriate restructuring request significantly more quickly and efficiently.
“We are delighted to launch this new service in partnership with Sharpe Pritchard,” said Nick Burrows, VAT Director at PSTAX. “The care sector is facing a number of challenges, and we believe that our joint expertise can help local authorities navigate these changes and ensure that they are getting the best possible value for money from their care contracts.”
What is the contract care restructure?
Care providers are approaching local authorities requesting to novate their care contracts to a new, unregulated “management” company. The contractual arrangements change to between the local authority and the new management company, with a regulated company delivering the care under contract to the management company.
Care providers can achieve many types of benefits from restructuring, one of which is potential VAT savings.
Potential risks to local authorities
Following the restructuring, an unregulated company will supply the local authority with welfare services. The VAT exemption will not apply, and VAT will be charged on the supplies made to the local authority. The intention is for the local authority to reclaim this VAT.
However, a local authority can only recover VAT that is properly charged. HMRC has powers to deny VAT recovery where an arrangement is “abusive”, i.e., artificially structured just to achieve a better VAT position.
A local authority must also operate within a specific legal framework and meet numerous regulatory, procurement, contractual, tax compliance, and other responsibilities.
PSTAX and Sharpe Pritchard’s Due Diligence Service for local authorities
Sharpe Pritchard and PSTAX’s new service assists local authorities in undertaking the essential due diligence checks to ensure that the novation proposal does not present any unacceptable risks for VAT and other regulations.
Their joint service will satisfy the requirements of HMRC and other relevant bodies. Typically, there will be no cost to a local authority for the PSTAX and Sharpe Pritchard’s due diligence service.
“We are very pleased to be working with PSTAX on this important initiative,” said Peter Collins, Partner at Sharpe Pritchard. “We have a long history of advising local authorities on complex legal and regulatory matters, and we are confident that our expertise can help local authorities to make informed decisions about care contract restructuring.”
The service is available to all local authorities in the UK. To find out more about the service, please click here or contact Peter Collins, Partner at Sharpe Pritchard.
