Value Added Tax - VAT

VAT

This can be a complex area and authorities are advised to refer to guidance issued by HMRC in 'Local authorities and similar bodies' (VAT Notice 749). 

Smaller authorities with little self-generated income will most likely recover VAT using the VAT126 form.

Those authorities which are VAT registered, submitting quarterly returns, are, from April 2022, included within the VAT for MTD regulations. It would be expected that all such authorities are using HMRC compliant software to prepare their returns.

Authorities carrying out building projects or managing income generating properties need to ensure that they seek up to date advice about Opting to Tax and Partial Exemption each time they undertake a project. 

It is also very important that the VAT position is established before community projects and construction projects are undertaken because budgets and fundraising may have been based on mistaken assumptions that VAT was recoverable when in fact it is payable and cannot be recovered - see VATGPB4440 - Section 33 bodies: recoverable VAT: community projects. 

Refer to NALC Financial Briefing F01-21 VAT reverse charging rules (in Legal Topic Notes) and NALC Legal Topic Note 32: 'Local Councils and VAT' for further information.

LALC can provide professional contacts and training to get VAT advice regarding your specific project or VAT issue. Log your enquiry and we will provide further advice and contacts if necessary.