Scottish Public Finance Manual

The Scottish Public Finance Manual (SPFM) is issued by the Scottish Ministers to provide guidance on the proper handling and reporting of public funds.

FGN2019/04SPFM amendments: June 2019

FGN2019/04SPFM amendments: June 2019

The purpose of this note is to announce recent amendments to the Scottish Public Finance Manual (SPFM). The amendments are as follows:

VAT chapter:

Throughout this document terminology updates have been inserted to provide readers with a more user friendly document, hyper-links and other changes inserted for ease of reading.

Introduction of the following paragraphs, with corresponding content: ‘Crown bodies and health authorities,’’ ‘Section 33 bodies,’ ‘Non-departmental public bodies,’ ‘Trading funds’, ‘Considering VAT Implications’, ‘VAT Status of Suppliers and Supplies’, ‘Off system purchases’ and ‘Non UK transactions.’

General update of Scope & Key points

The paragraphs state that public sector organisations should not engage in, or connive at, tax evasion, tax avoidance or tax planning going into detail regarding reasoning and policy. It also talks about using tax advisors and issues that should be considered when contracting with them.

Paragraph eight advises the reader that Public Sector bodies fall within four different elements under the VAT Act; Crown Bodies; Section 33 Bodies; Executive NDPBs and Trading Funds. Paragraphs nine to 22 explains what type of public bodies fall within each of the four classes of bodies. For instance Local Authorities fall within Section 33 of the VAT Act. These sections will further demonstrate how each of the four classifications differ in terms of their legislative powers.

The Key points were replaced with Key Messages to either reflect current matters, or to provide more detail or clarity. Additionally new paragraphs are:

•   Considering VAT Implications
Emphasises the importance and benefits of early engagement with the VAT Team prior to issuing a purchase order (PO) or issuing invitations to tender (ITT’s) if there is any uncertainties with the treatment of VAT. It also Informs the reader that it is good practice to consider in association with your VAT Team the VAT implications for all contracts worth in excess of £1 million.

•   VAT Status of Suppliers and Supplies
This section informs the reader of the implications for  non VAT-registered & VAT registered suppliers when charging & reclaiming VAT for both input & output VAT in relation to business and non-business supplies.

•   Off System Purchases
This new section alerts the reader to the fact that modern methods of procurement such as procurement cards or credit cards need to be considered in terms of the VAT recoverability processes and other impacting compliance issues.

•   Non UK Transactions
This section provides the reader with greater clarity and explanations surrounding Non UK Transactions such as the treatment of supplies of goods & services provided by or received into the UK, other EU member states and non EU Countries. These are commonly referred to as foreign payments and references such as acquisition & import tax and reverse charge regime will feature and be expanded on in the detailed guidance linked.

Two new annexes have been introduced:

• Annex A provides guidance on the VAT relationship between GDs, NDPBs, Executive Agencies and Trading Funds. It should be noted that this was in the body of the guidance previously
• Annex B gives a simplified diagrammatic view of the position with public bodies

Scottish Government Finance Directorate

June 2019

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