Public Sector

To avoid a VAT burden on local government, there are special rules to allow recovery of VAT on the costs of non-business activities undertaken by these organisations.

However, the structure of local government is constantly evolving, both to manage costs and a result of changes in responsibilities for delivering services. This has resulted in services such as leisure and social care, previously operated within the public sector under the advantageous special VAT regime, having to operate under normal VAT rules with a resulting VAT cost.

The VAT implications of the transactions entered into by the local authority must be properly understood, which is why we’re by your side to ensure that VAT does not cut across the most appropriate way of running your organisation.

Using our combined years of experience in dealing with VAT, not only do we save you time, money and resources, but in doing so free up your cash to be put into the provision of front-line services – instead of VAT bills.

What are the issues?

As always, the VAT implications of the transactions entered into by the local authority must be properly understood. This will ensure that VAT does not cut across the most appropriate way of running the organisation. Here are some examples:

Partial exemption reviews

Partial exemption is one of the most significant VAT issues affecting local government. The calculation can be complex and time consuming, and there is the possibility of a significant financial cost should the de-minimis limit be breached. There are however a number of particular rules for local government when considering its partial exemption position, which we would consider.

Complex transactions / Land and Property issues

Where local government is involved in complex land and property transactions involving many parties, the VAT exposure can be significant.
We can help you manage such transactions in the most appropriate and efficient manner. We are happy to work with all parties involved in the transaction to ensure the best possible outcome and where appropriate, an assessment of the impact of the transaction on your partial exemption position.

Outsourced services such as Social Healthcare

As noted above, a VAT cost can be created by removing the provision of certain services from a local authority and placing them in the hands of a separate stand-alone vehicle. Early engagement with HMRC can help to ensure that the VAT cost is managed in the most appropriate way and eliminated altogether in most cases.

How can we help?

Raphael Suissa has over 20 years’ experience advising on a wide variety of VAT related issues within a Big 4 environment. For the last eight years, he has been leading the public sector offering within the North West of England. He can help to identify whether you are accounting for VAT in the most appropriate manner and in liaising with HMRC as and when required.