5.55 The adjustment of market prices for taxes in appraisal is appropriate where it may make a material difference to the decision. In practice, it is relatively rare that adjustments for taxation are required, because similar tax regimes usually apply to different options. It can also be difficult in practice to estimate costs net of tax. However, where the tax regimes applying to different options vary substantially, this should not be allowed to distort option choice. In such cases it is important to adjust for any differences between options in the incidence of tax arising from different contractual arrangements, such as in-house supply versus buying in, or lease versus purchase. Options attracting different VAT rates, for example, should be compared as if either the same VAT payments, or no payments were made in all cases.
5.56 Where publicly financed options are compared to PFI options, taxation differences should be considered, and adjustments explicitly made if not doing so would materially distort the decision. Specific guidance is available on the Treasury Green Book homepage on how to do this in practice.