THIS NOTE SETS OUT THE REVISED UK PROCUREMENT THRESHOLDS THAT CAME INTO EFFECT ON 1 JANUARY AND HOW VAT IS TO BE TREATED FOR CALCULATING THRESHOLD VALUE.

The new thresholds apply to procurements conducted under the Public Contracts Regulations 2015, the Concession Contracts Regulations 2016, the Utilities Contracts Regulations 2016 (and their equivalents in Scotland), and the Defence and Security Public Contracts Regulations 2011.

The thresholds are now expressed inclusive of VAT, not net of VAT, reflecting a change in practice resulting from the UK's independent membership of the WTO Government Procurement Agreement. This change means that the thresholds have, in effect, been reduced.

The new thresholds (inclusive of VAT) applying from 1 January 2022 are:

Public Contracts

• Works: £5,336,937
• Services and Supplies (central government authorities): £138,760
• Services and Supplies (other public sector authorities): £213,477

Utilities

• Works: £5,336,937
• Services and Supplies: £426,955

Concessions

• Concession Contracts: £5,336,937

Defence and Security

• Works: £5,336,937
• Services and Supplies: £426,955

The small lots thresholds under the public, utilities and defence and security regimes are unchanged but are now inclusive of VAT:

• Small Lots - Works: £884,720
• Small Lots - Services and Supplies: £70,778

Likewise, the Light Touch Regime services thresholds are unchanged at £663,540 (Public Contracts) and £884,720 (Utilities) but are now inclusive of VAT.

The Cabinet Office's Procurement Policy Note on the new thresholds (PPN 10/21, published in December) advises procurers to calculate the estimated value of a contract based on the total amount payable including VAT, without making a deduction for any available VAT recovery; it suggests using the standard rate of VAT (currently 20%).  It also notes that, for the purpose of advertising and for contract award notices, the estimated contract value will continue to be provided exclusive of VAT.