Local Authority VAT Update

Centurion’s VAT support to the local authority sector within Wales continues to expand. The current range of issues we are dealing with are concentrated around projects in Leisure and Cultural services where councils are transferring such operations out to independent trusts.

The mechanisms for enabling the transfers do vary dependent on the needs of the organisations concerned but certainly the VAT issues need addressing early in the process.

Collaboration projects whether between authorities on shared services or on property projects with third parties, such as housing associations, to ensure projects are not delayed by VAT concerns remains a theme. A recent project dealt with the VAT issues regarding Community Equipment Store arrangements with health boards to ensure that VAT was not a cost to the health board as a result of the joint arrangements.

VAT costs within the increasing use of corporate purchasing cards across authorities should be highlighted as both a compliance risk and an opportunity area.

The impact of the Brockenhurst College case on the non-business treatment which could impact on training services delivered by authorities also needs to be considered and is something we’ll be raising with our clients in our VAT management programme visits through the year.

Still no news on the outcome of the Isle of Wight parking case (Upper Tribunal Hearing took place on the 10-11 April). HMRC have confirmed they would consider “unjust enrichment” should they lose. Authorities should still be putting protective claims in for the excess charges issue as well.

Voluntary Aided Schools – the definition of capital expenditure still rumbles on in Wales as Welsh Government contacts helping work the issue through have recently changed and the expectation is that discussions will resume in May/June of this year.

Compound Interest issue is progressing slowly. The High Court has released its decision in favour of compound interest being a right in principle under European law. We’ll await the reaction of HMRC and estimate it’ll take a further 18 months to achieve clarification.

Continue to be vigilant on funding arrangements with third parties especially charities. The language in documentation attached to funding arrangements continue to cause confusion over whether monies passed are grant or payments for services received. The most recent VAT tribunal case by way of illustration is Woking Borough Council where services rendered by a charitable body to the council for the provision of Arts , Museum, Cultural and Visitors Information services were deemed to be a taxable business supply by the charity.

 More detail on the facts of the Woking case can be found: http://www.centurionvat.com/news/2014/woking-borough-council-case-grant-v-contract-again/