12.4.1 Standard required provisions for VAT on such payments are as follows:177
12.4 VAT
(a) All amounts due under this Contract are exclusive of VAT.
(b) If any supply made or referred to in this Contract is or becomes chargeable to VAT then the person receiving the supply (the "Recipient") shall in addition pay the person making the supply (the "Supplier") the amount of that VAT against receipt by the Recipient from the Supplier of a proper VAT invoice in respect of that supply.178
12.4.2 If amounts due under the Contract are calculated by reference to costs incurred by any person and VAT has been incurred on the costs, then VAT should not be included in the calculation of those costs if the person concerned can recover the VAT from HMRC. Required drafting for this is as follows:
Where under this Contract any amount is calculated by reference to any sum which has or may be incurred by any person, the amount shall include any VAT in respect of that amount only to the extent that such VAT is not recoverable as input tax by that person (or a member of the same VAT group), whether by set-off or repayment.
12.4.3 A provision as follows is also required for the above to work:
The Contractor shall provide the Authority with any information reasonably requested by the Authority in relation to the amount of VAT chargeable in accordance with the Contract and payable by the Authority to the Contractor.
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177 For changes in law relating to VAT that qualify for compensation see Section 14.10.2 (Changes in VAT Scope).
178 In relation to transactions that are "VATable" at the election of the Supplier (e.g. grants of land interests) then other considerations will be relevant. Typically, the Recipient should be entitled to agree the election before it is made.