VATGPB10770 - Government departments and health bodies: Contracted Out Services (COS) Headings: COS Heading 52 - Professional advice
Source: gov.uk (2025-06-16)


The full heading reads: Supplies to:-

(a) a Government department as defined in section 41(6) and (7)(l) of the Value Added Tax Act 1994 but excluding entities designated under subsection (6) and all other bodies defined in subsection (7) of:

professional (excluding legal professional) advice or opinion on departmental efficiency or policy but excluding such services when used in connection with the department's operational activities,

legal advice and opinion and the conduct of civil litigation, and

internal audit; and

(b) bodies defined in section 41(7)(a) to (k) of the Value Added Tax Act 1994 of professional services including those of any manager, advisor, expert, specialist or non-medical consultant but excluding the provision of tax planning advice and the supply of staff

This above is the exact wording of the heading which was published on 30 October 2020. For clarity, clause (a) applies to government departments and clause (b) to health service bodies.

This heading relates to the provision only of advice. It does not apply where the services involve acting upon instructions, i.e. implementation. The heading assumes a clear distinction between the two types of service, but where contracts are of a more general nature, the terms of engagement will determine if the supplier is acting in the capacity of an advisor rather than as a representative acting upon instructions.

For clarity, the wording “…but excluding such services when used in connection with the department’s operational activities” will not alter the way HMRC will apply the wording to supplies in practice. We will not restrict recovery provided the services are advisory in nature, they do not extend to implementation or putting the content of the advice into effect, and they concern departmental policy or efficiency.

Government departments

This heading covers professional advice on policy formulation, but not on the implementation of policies. Providing advice may, of course, include making recommendations, but not acting upon them. Specific information on what is included and excluded is contained below.

Includes
- Internal audit reports. The Chartered Institute of Internal Auditors describes this role as providing independent assurance that an organisation's risk management, governance and internal control processes are operating effectively. Internal audits have a wider role than simply addressing operational activities and are therefore recoverable under this heading.
- All criminal and non-criminal legal advice and opinion. (see “Additional information” below).
- Legal (subject to the "Additional information" below), advisory or consulting services supplied to a Government Department which is sponsoring an Independent Public Inquiry, but not supplies of staff.
- Hire of consultants to provide advice on efficiency issues or comment on the viability of new departmental initiatives.
Excludes
- The hire of a consultant to work as part of the Department.
- Research - this is covered by Headings 20, 58, 59, 66 or 74.
- The service of actually putting something into effect, as opposed to merely advising on a matter. For example, the services of a professional who is brought in to advise on AND then implement a new initiative. Where the advice and implementation form part of the same contract, none of the services can be recovered.
- Supplies of staff
- Staff secondments - because this involves contracting in staff to work alongside existing employees.
- Specialist staff hired to provide “holiday/ maternity cover” for key staff members.
- Hire of accountants to carry out tax health checks. This does not involve providing advice on policy formulation. See VATGPB9750 (https://www.gov.uk/hmrc-internal-manuals/vat-government-and-public-bodies/vatgpb9750) for recovery of outsourced accounts department services.
Additional information

On 14 April 2014, HM Treasury wrote to Government Departments about Shared Service Arrangements and refunds under this heading for non-criminal legal services. In so far as the Treasury directs HMRC, in individual cases, VAT can also be recovered on other non-criminal legal services. Bodies that have such an arrangement with HM Treasury may continue to claim refunds on all non-criminal legal services.

NHS bodies

VAT is recoverable on the professional services of managers, advisers, experts, specialists and consultants in providing advice or information on how to put something into effect. The eligible services are therefore of an advising nature, rather than of implementing a change, taking action following a recommendation, etc.

Includes

Services relating to capital projects (mainly building)
- Architects
- QSs
- Engineering consultants
- Cost advisers
- Project advisers
- Clerk of works
- Safety advisers
- Planning consultants
- Project accountants
Other professional services
- HR
- Clinical service consultants
- Process consultants
- Legal advisers
- Internal audit
- Counter-fraud services
- Advice on business planning including activity forecasting, demographic movements, accounting
- Computer consultancy fees, including contract software development
Excludes
- Supplies of staff
- Staff secondments - because this involves contracting in staff to work alongside existing employees.
- Specialist staff hired to provide “holiday/ maternity cover” for key staff members.
- External audit
- External teams appointed by bodies such as Monitor and the DHSC which are “imposed” on NHS bodies
Legal advice and opinion

This heading assumes a clear distinction between the services of providing advice or an opinion, and the services of acting on instructions in another capacity – such as legal representation in court or drafting contracts. However, where a contract is more general in nature, as may be the case with longer-term contracts with lawyers, what is important is the terms of engagement and whether the lawyer is acting in the capacity of an adviser rather than, for example, a legal representative or advocate. The services of advising on the outcome of prospective litigation, and of legal case management, will normally be viewed as an advisory service.