To VAT or not to VAT, that is the question? … new procurement thresholds from 1 January 2022

Procurements advertised on or after 1 January 2022 will be subject to new thresholds.

Now we have left the EU, the revision is implemented not by way of a communication from the European Commission, but rather via UK statute – the various sets of procurement regulations will be amended with effect from 1 January by the Public Procurement (Agreement on Government Procurement) (Thresholds) (Amendment) Regulations 2021 (SI 2021/1221).

Although in most cases the thresholds themselves will increase, a key change is that the thresholds stated will operate as inclusive of VAT (rather than exclusive of VAT as is currently the case). 

The effect of this will be to revise thresholds downwards for those contracts to which VAT is applicable. Procurement teams will need to take a new approach when calculating contract value and remember to take account of any VAT payable when assessing whether the appropriate threshold is reached. Details of the new thresholds follow.

Public Contracts Regulations 2015

The threshold for central government authorities (including since August 2021 NHS Foundation Trusts) procuring services or goods will rise from £122,976 to £138,760. For sub-central authorities, that threshold will rise from £189,330 to £213,477.

The threshold for works contracts for all authorities will rise from £4,733,252 to £5,336,937, while the threshold for all authorities procuring contracts subject to the “light touch regime” remains at £663,540.

Concession Contracts Regulations 2016

For concession contracts, the threshold for all authorities will increase from £4,733,252 to £5,336,937.

Utilities Contracts Regulations 2016

The threshold for goods and services contracts will increase from £378,660 to £426,955, with that for works increasing from £4,733,252 to £5,336,937. The threshold for “light touch regime” services remains at £884,720.

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