5.9 The payment mechanism should be structured so as to allow the NHS body to recover VAT which is charged on the services provided under the PPP contract. The relevant Treasury Direction is made under Section 41(3) of the Value Added Tax Act 1994 and published in the London Gazette annually. It allows for NHS bodies to claim a refund of VAT where services provided by the private sector include the operation of hospitals, healthcare establishments and healthcare facilities and the provision of any related services. The definition of any related services as it relates to the operation of hospitals means that the contractor can supply any other service which is not the provision of medical care. This would cover the supply of general services for the running of the building such as cleaning, maintenance, catering, etc. It must represent a complete package and not consist of separate charges which individually could be in part already eligible for VAT recovery under the contracted out services provisions.
5.10 In any properly structured PPP contract it should be demonstrable that the NHS body is procuring not simply the acquisition of an asset and some related services but a bundled stream of services.