Thresholds are easy to update and easy to get wrong: the VAT trap in PPN 11/23
Threshold notes are the least glamorous documents in public procurement. Every two years a set of figures moves to track currency fluctuations under the World Trade Organisation Agreement on Government Procurement, teams update a table, and life continues. PPN 11/23 delivered the figures effective from 1 January 2024. But buried in the middle of it is a sentence with far longer consequences than any of the numbers: when the Procurement Act 2023 comes into effect, estimated contract value for notices must be provided inclusive of VAT. If your organisation never actioned that, some of your threshold decisions have been made on the wrong basis.
Not everything moves when thresholds move
The most common error after a threshold revision is assuming the whole table changed. PPN 11/23 is explicit that thresholds for small lots, light touch regime services and below threshold contracts are not subject to the two year currency fluctuation amendment required for Agreement on Government Procurement compliance, and were not amended.
That matters because small lots and light touch are the figures people rely on to justify a lighter process. Adjusting them upwards on the assumption that everything drifts with the exchange rate is a self inflicted compliance risk.
It is also worth noting the split within the Public Contracts Regulations itself: £139,688 for central government bodies, defined as the Crown and the bodies listed in Schedule 1, against £214,904 for others. Organisations that sit near that boundary, or that buy on behalf of bodies on both sides of it, need to be deliberate about which figure applies.
The VAT change is the real story
Under the UK regulations, estimated contract value for notice publication is exclusive of VAT. Under the Procurement Act 2023, it must be inclusive of VAT. PPN 11/23 flagged this in December 2023, when the new regime was expected in autumn 2024. It ultimately applies to procurements commenced on or after 24 February 2025.
The practical effect is that a requirement estimated at just under a threshold on the old basis can be over it on the new one. For services around the £1 million mark this now interacts with other policy, since later notes set value tests inclusive of VAT too. Estimating habits formed over a decade do not update themselves.
The fix is unglamorous: check every place a value is entered or judged. Business case templates, approval matrices, procurement strategy forms, spreadsheets maintained by budget holders. The commercial team is usually the last link in that chain, not the first.
Treat threshold revisions as a scheduled maintenance job
Because the revision cycle is fixed at two years and driven by currency movement rather than policy, threshold changes are the most predictable events in the procurement calendar. Yet they routinely arrive as a surprise, prompting a scramble to update guidance that has already been relied on for weeks.
A better pattern is a standing task with a named owner covering the same list each cycle: policy documents, delegated authority limits, templates, training material, any automated checks, and a note to finance. Advance notification notes like this one exist precisely so that work can start before the effective date.
For suppliers, the value of knowing the current figures is simpler. The threshold determines whether an opportunity carries the full regulatory obligations, and therefore what level of transparency, notice publication and process you should expect. If a buyer is running something well above threshold as though it were a quiet local exercise, the figures are how you know.
The takeaways
- New thresholds under the UK regulations took effect from 1 January 2024.
- Central government supplies and services sit at £139,688, other bodies at £214,904, works at £5,372,609.
- Small lots, light touch and below threshold figures were not changed by the two year adjustment.
- Notice values are exclusive of VAT under the UK regulations but inclusive of VAT under the Procurement Act 2023.
- Thresholds move every two years for currency reasons, so treat updates as scheduled maintenance.
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