The Business Services Association (BSA), who represents security industry players such as Mitie, OCS, and G4S, has declared the 2015 Budget a “big win”. The extension of the removal of VAT charges for private sector outsourcers for public sector work will create a level playing field with “in house” bidders. Previously, the private sector companies were required to add VAT to their charges.
Mark Fox, Chief Executive of the BSA declared it a “big win”. “At the moment the private sector provider has to factor in an additional 20 per cent VAT when they pitch the cost of contract bid,” adding that the change would be a “significant boost” to the industry.
Audrey Fearing, Ernst & Young’s (EY), Government and Public Sector Tax Partner comments on the extension of VAT relief to the public sector:
“The shared services sector received an unexpected boost as Public Sector outsourcing was re-incentivised today.
“The outsourcing and sharing of services by a large number of Public Sector bodies has historically been hampered by the imposition of VAT resulting in the “in-house” delivery model almost always being cheaper. This cost has now been removed as going forward eligible Public Sector bodies will be able to reclaim the VAT incurred on outsourced/shared service from HMRC.
“This opens the way for Public Sector bodies to explore innovative ways for reducing the cost of delivery, by sharing back office functions, or indeed outsourcing to third parties who can drive greater economies of scale.
Bjorn Conway EY Government and Public Sector Leader added: “This is to be welcomed given that Government has been tasked with delivering £13bn of savings.”
According to the Financial Times – “Government outsourcing has doubled to £88bn since the coalition came to power in 2010, compared with the previous four years. Last month 10,000 probation staff transferred to private sector employers, including Interserve and Sodexo.
“Meanwhile coalition reaffirmed its commitment to the privatisation of public services by outlining more than £20bn of asset sales to complete over the next year.”