Source · Select Committees · Public Accounts Committee
Recommendation 25
25
Accepted
Unanticipated VAT liability reduced RFCA volunteer estate maintenance funds.
Recommendation
The Department had not anticipated that the RFCAs would be liable to pay VAT on work done through the FDIS contract, which has resulted in the RFCAs having had less money available for maintenance than expected. The Department explained that the crux of the issue was ownership of the estate which had been built up over 100 years through donations, departmental funding and purchases by the RFCAs themselves. VAT can be clawed back on assets owned by the Department, and HM Revenue & Customs has proposed that the Department conducts a site-by-site review to establish ownership for tax purposes.38 The Department added that the move to an NDPB may provide an opportunity to review the VAT arrangements as the built estate would sit on the NDPB’s accounts and would then be consolidated into the Department’s accounts.39 Financial oversight
Government Response Summary
The Department submitted a formal submission to HMRC on 1 December 2025 to consider the case and provide further opinion and guidance on what evidence or actions are necessary to be able to recover VAT incurred by MOD on maintaining the volunteer estate and will provide updates on progress.
Government Response
Accepted
HM Government
Accepted
5b.PAC recommendation: [To establish and maintain an optimised volunteer estate the Department should] • Write to the Committee alongside its Treasury Minute response, regarding progress on its discussions with HMRC relating to the RFCAs’ VAT status. 5.5 The government agrees with the Committee’s recommendation. Target implementation date: March 2026 5.6 The department submitted a formal submission to HMRC on 1 December 2025 to consider the case and provide further opinion and guidance on what evidence or actions are necessary to be able to recover VAT incurred by MOD on maintaining the volunteer estate. 5.7 The department will provide updates on progress as requested by the Committee.