Managed equipment service (MES) contracts have long been used by the NHS as a means to replace medical equipment without capital expenditure. The contract usually involves the MES supplier providing equipment within a package of services including maintenance and provision of consumables, paid for by the customer from operating expenditure. In addition, it is often possible for the customer to recover VAT through the contracted out service rules. However, the two main features of a MES, avoidance of capital expenditure and recovery of VAT, are about to become more challenging to achieve due to the implementation of IFRS 16. This article explores the issues and proposes a solution for some situations.
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This is an edited version of an article first published on LinkedIn Pulse on 8 June 2018. There has been a lot of debate in the health service and national press recently about the increasing number of NHS Trusts setting up wholly owned subsidiaries. To date I have not read anything that accurately describes the commercial model for these companies, as much of the published literature is from a particular political ideology or from NHS Providers communicating the message ‘nothing to see here’. Much of the controversy surrounding wholly owned subsidiaries is the ability to make VAT savings and the potential to remunerate staff on less favorable terms and conditions. There have also been accusations of privatisation via the back door. Having recently supported a NHS Foundation Trust in the south of England to set up a wholly owned subsidiary to deliver fully managed healthcare facilities, in this article I explain from an unbiased perspective the issues to consider and the typical commercial model. |
Mark Magrath MBAI am a management consultant with 12 years experience as an executive director in an NHS Foundation Trust, including 10 years as Deputy Chief Executive. I only write blogs on projects and assignments that I have personally led. My aim is to write amazing content that combines real world experience with insightful advice. Categories
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