Archived Documents:

GOMMMS Errata

1. This should be read in conjunction with the DETR publication “Guidance on Methodology for Multi-Modal Studies” (GOMMMS) dated March 2000.

2. This note provides revised DETR guidance and advice on the treatment of construction costs and the impact on public transport operators of transport projects/schemes. In particular it explains the revised advice and provides replacement paragraphs for GOMMMS.

• GOMMMS, Volume 2 Appendix F - Paragraph 5.15 - Impacts on transport providers

  An issue arises because of the VAT treatment of public transport (and some other charges). The advice previously provided in GOMMMS (2000) was that no adjustment was required to bring revenues into the market price unit of account. With all appropriate duties and VAT the advice was that revenues to public transport operators were already in market price unit of account and needed no further adjustment. Following further consideration, further advice is necessary.

  Although the VAT rate is zero, this does not change the general treatment. Once a public transport operator ‘recovers’ VAT (even at zero rate) their revenues are then in the factor price unit of account. Therefore these revenues need uprating by (1+t) to obtain the value in market price unit of account. The following paragraph should replace paragraph 5.15 in the March 2000 version of GOMMMS.

  “Paragraph 5.15 - Revenues are given by the following equation:

for both work and non-work trips. Although fares and some other charges (on-street parking for example) do not attract VAT, these revenues must be converted to the market price unit of account by uprating by a factor of (1+t) – where t is equal to the average rate of indirect taxation on final consumption). Where revenues do include VAT, this must be removed and the resulting value (in factor cost unit of account) should be uprated by (1+t). Together, these adjustments make consistent the treatment of transport provider revenues with other values in the appraisal, including operating and construction costs.”

• GOMMMS – Volume 1 Appendix B – Paragraph 1.16

  It is important that all construction costs are included in the market price unit of account. Previously the advice in GOMMMS was that, because the Highways Agency in all cases paid VAT, their gross of tax payments were already in market prices and therefore needed no adjustment. The following paragraph should replace 1.16 in the March 2000 version of GOMMMS.

  “Paragraph 1.16 - Care will be required to ensure that the adjustment to the market price unit of account is carried out correctly. Where costs are not subject to VAT (or the operator can reclaim VAT), these costs should be multiplied by (1+t), where t is the average rate of indirect tax on final consumption.

  Under some circumstances the Highways Agency does pays VAT on construction costs, in others it doesn't pay VAT. In the former case, the VAT element of construction costs should be removed before multiplying the resulting value by (1+t). The Highways Agency should be treated in the same way as a private sector construction company and any VAT paid by the Highways Agency can be regarded simply as an internal Government Transfer.”

Updated: March 2003