The high profile collapse of the £750M Uniting Care Partnership this year due to shortfalls in tax and financial modelling has raised concerns about the processes and controls when entering in collaborative projects. Does your organisation have the necessary checklists?
The high profile collapse of the £750 million Uniting Care Partnership (“UCP”) this year due to shortfalls in tax and financial modelling during the procurement and planning phases has raised concerns about the processes and controls followed by public bodies when entering in collaborative projects. As a prominent cause, the UCP model became unviable due to the unexpected consequence of two public bodies working together in a formal partnership changing the VAT treatment through the supply chain. Despite an application for concessionary treatment to HMRC, the tax authorities were not empowered to offer relief in contravention of the normal VAT rules. Heavy criticism of the relevant leaders was received at a parliamentary level and arguably damaged the public perception of those organisations involved.
Why is this important?
Whilst many collaborations and joint working projects are often nobly focused on improving the quality of service delivery, it remains incumbent on public bodies to ensure they have properly considered the financial impact plus assessed any potential VAT and tax consequences as a result of new working models. Authorities can often fall into the scenario where they form a legal partnership without necessarily understanding that this has occurred and any potential consequences as a result. Organisation should therefore ensure their procedures include the necessary checklists for measuring the tax impact (all taxes) at the early stage in the project.