Care Contract Novation – Addressing the Care Crisis

Care Contract Novation

The UK’s care sector is facing an unprecedented crisis as the demand for care services grows, leaving thousands of individuals in hospitals or stuck at home waiting for crucial care assessments.  The situation has reached a critical point, with delays in care assessments lasting for months and, in some cases, even years.

A case of delayed care

A story has recently emerged of a 96-year-old woman named Lily, who spent 11 of her 15 months in hospital waiting for care support to become available.  Despite being medically fit to leave, she had to remain in the hospital due to her council’s struggle to find carers to support her at home. Lily’s situation is just one of many such cases across the UK, and it highlights the urgency of addressing the issues in the care system.

PSTAX and Sharpe Pritchard’s Care Contract Novation Due Diligence Service

To help tackle this growing issue, PSTAX and leading public sector law firm, Sharpe Pritchard, have come together to offer a comprehensive Care Contract Novation Due Diligence Service for local authorities and other public sector care commissioners.  The service aims to help local authorities navigate the complex process of contract restructuring driven by private care providers.

The Benefits of Care Contract Novation

Care contract novation is a solution for care providers looking to reclaim VAT on their services. Traditionally, care fees have been exempt from VAT to keep them affordable for end-users. However, this means care service operators cannot claim back VAT as part of their trading costs, unlike many businesses in other sectors.

Care providers are exploring all areas they can to make savings, and contract restructuring to allow VAT recovery is one of these. However, councils need to conduct careful legal and tax due diligence before agreeing to a contract novation.

Empowering Local Authorities

Local authorities must operate within specific legal frameworks and meet various regulatory, procurement, contractual, and tax compliance responsibilities. While they are keen to support care providers amid financial pressures, they cannot simply agree to restructuring proposals without adequate due diligence. PSTAX and Sharpe Pritchard’s service allows local authorities to conduct thorough assessments efficiently and ensure they can meet their responsibilities while aiding care providers.

The Care Contract Novation Due Diligence Service offered by PSTAX and Sharpe Pritchard is a step towards addressing the care crisis. By assisting local authorities in navigating contract novation proposals, we can improve the availability of care services, ease the burden on care providers, and ensure a better quality of life for those in need of care support. However, this is just one piece of the puzzle, and comprehensive efforts are required to overhaul the care sector and provide the care and support our elderly and vulnerable population deserves.

Learn more about our Care Contract Restructuring Service

Nick Burrows

Written by Nick Burrows

Nick has nearly 30 years of working with and supporting public sector bodies with VAT and indirect taxes, starting at HM Customs and Excise and then as in-house VAT Officer at Hampshire County Council. Since moving to advisory firms, Nick has had senior public sector VAT roles at RSM Tenon (now RSM), KPMG, and PSTAX (since 2014). He has led VAT advice nationally on a wide range of public sector issues and helped shape HMRC policy in several key areas.

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