Question to the HM Treasury:

To ask Mr Chancellor of the Exchequer, what estimate he has made of the potential cost to the public purse of extending contracted-out services VAT refunds to the successful bidder of the Defence Fire and Rescue project.

Section 41 of the VAT Act 1994 allows government departments and NHS authorities to recover VAT incurred on certain contracted out services when those services relate to non-business activities. The mechanism does not apply to companies which are in business.

The purpose of this mechanism is to ensure that VAT does not sway decision-making when government departments decide how to design services.