I don't know what the value of my contract will be, what do I do?
If you are unable to estimate the value of a contract that contract will be explicitly made subject to the procurement rules.
More information can be found in Public procurement – Australia and New Zealand Free Trade Agreements: SPPN 1/2023 and additional information can be found at What Procurement Route Should I Choose?
Will suppliers bidding through OJEU still be required to exclude VAT?
Yes, that is correct.
There is no change: all contract values should still be advertised and bids submitted exclusive of VAT.
Why did the public procurement threshold values change on 1 January 2022?
GPA procurement thresholds are revised every two years to take account of currency fluctuations. The most recent change occurred on 1 January 2022.
Since the UK left the EU and joined the World Trade Organisation (WTO) Agreement on Government Procurement (GPA), the UK will adhere to the WTO GPA thresholds. The threshold change on 1 January 2022 is the first WTO GPA thresholds change made since the UK left the EU.
Why will contract estimation be inclusive of VAT from 1 January 2022?
EU procurement thresholds and spend calculations were net of VAT to balance the differing EU member states VAT rates. This no longer applies as the UK has left the EU. As a result VAT must be added, if VAT is applicable to the contract, when you are calculating the estimated value of your contract.
What level of VAT needs to be added/how do I calculate?
It is recommended best practice to add 20% to your estimated contract value. 20% is recommended as this is currently the standard rate of VAT in the UK. Adding this standard rate will remove the risk of underestimating the contract value and therefore ensure your contract is advertised at the correct threshold.
If your contract is not subject to VAT then no VAT needs to be added to the estimated contract value.
If your contract is VAT recoverable, you should still include VAT in your calculation.
Has legislation been amended to reflect this change?
Yes. On 1 January 2022 the Public Procurement (Agreement on Government Procurement) (Thresholds etc.) (Amendment) (Scotland) Regulations 2021 came into force. This amended a number of elements within Scottish procurement regulations, including the method for calculating the estimated value of a contract, as set out in regulation 6(1) of the 2015 Regulations.
Will there be any change to publishing Contract Notices and Contract Award Notices?
No, these notices must still be published exclusive of VAT.
VAT only needs to be included if your contract is subject to VAT and when you are calculating the estimated value of your contract to determine which procurement route you will follow.
How will call-offs from Frameworks or Catalogues already in place be affected by this change?
There is no change where the original advert was published before 1 January 2022. In this case the contract estimation calculations should exclude VAT.
Will suppliers need to include VAT in their bid? If so, how will this be communicated to suppliers?
There is no change - all contract values should still be advertised and bids submitted exclusive of VAT.
Do We Need to Make Any Other Changes e.g. to our systems to now include VAT?
Back office systems should not need to be amended. Finance payment systems will continue to calculate actual VAT figures. You should seek advice from your finance and legal departments.
You only need to estimate your contract value at the front end of the procurement process in relation to threshold values i.e. to allow you to determine which procurement route you will follow.
Should I Include the Cost of VAT in my Estimated Contract Value Even if I Can Reclaim VAT for my goods/services contract?
You must include the value of UK VAT even if it can be reclaimed. We suggest estimating 20% across the entire contract value unless a more precise estimate can be made on the treatment of VAT.