VAT — refunds to the East Midlands Combined County Authority
Published 12 November 2024
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This publication is available at https://www.gov.uk/government/publications/the-value-added-tax-refund-of-tax-to-the-east-midlands-combined-county-authority-order-2024/bfa44498-3e89-4d67-a0f2-02207c6063c8
Who is likely to be affected
The East Midlands Combined County Authority which was established on 28 February 2024.
General description of the measure
This measure will add the East Midlands Combined County Authority to the list of public bodies eligible to claim refunds of VAT in respect of their non-business activities under section 33 of the Value Added Tax Act 1994 (‘section 33’).
Policy objective
The refund scheme provided for by section 33 ensures that what would otherwise be irrecoverable VAT incurred on purchases of goods and services made to support the statutory non-business activities of local government bodies does not become a cost borne out of local taxation.
Background to the measure
Since VAT was introduced in 1973, local authorities have been able to claim refunds of VAT under the section 33 refund scheme. In the absence of the section 33 refund scheme, this VAT would not be recoverable as local government bodies do not usually make taxable supplies.
The Secretary of State for the Ministry of Housing, Communities and Local Government is empowered to establish Combined County Authorities under the Levelling Up and Regeneration Act 2023 in order for a group of local authorities to:
- pool appropriate responsibility
- receive certain delegated functions from local or central government to deliver policy more effectively over a wider area
The East Midlands Combined County Authority meets the criteria to be included in the section 33 refund scheme, and this measure will ensure that this body can recover VAT in the same way as other local government bodies do.
Detailed proposal
Operative date
The measure will have effect from 3 December 2024.
Current law
Section 33 of the Value Added Tax Act 1994 (‘VATA’) allows refunds of VAT paid by eligible public bodies on purchases (and importations) of goods and services made in support of their non-business activities. Among the eligible bodies named in section 33(3) of VATA are local authorities. The term local authority is defined in VATA, however, this definition does not include Combined County Authorities. HM Treasury has the power under section 33(3)(k) of VATA to make orders specifying other bodies that can recover VAT under section 33.
Proposed revisions
HM Treasury will make an order specifying the East Midlands Combined County Authority as being a body entitled to recover VAT under section 33.
Summary of impacts
Exchequer impact (£ million)
| 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028-2029 |
|---|---|---|---|---|---|
| Nil | Nil | Nil | Nil | Nil | Nil |
This measure is not expected to have an Exchequer impact.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
This measure is not expected to have any impact on individuals, households and families as it makes provision for the East Midlands Combined County Authority to recover VAT on purchases relating to its statutory non-business activities.
This measure should have no impact on family formation, stability or breakdown.
Equalities impacts
It is not anticipated that there will be impacts for those in groups sharing protected characteristics.
Impact on business including civil society organisations
This measure will have no impact on businesses as it specifically relates to VAT recovery by the named body under the same scheme as other local authorities. One-off costs for the East Midlands Combined County Authority are expected to be negligible but will include familiarisation with this change and the possible training of staff. Continuing costs are also expected to be negligible, with any additional record-keeping forming a part of the normal VAT process.
Overall this measure is expected to have no impact on businesses’ or individuals’ experience of dealing with HMRC as the change does not alter any processes or tax administration obligations.
This measure is not expected to impact civil society organisations.
There is no impact on individuals as this measure only affects local authorities.
Operational impact (£ million) (HMRC or other)
It is not anticipated that implementing this change will incur any additional costs for HMRC. There is an established process for dealing with VAT refunds under section 33.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be kept under review through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, contact David Smith by:
- telephone: 03000 593922
- email: david.smith7@hmrc.gov.uk
Declaration
James Murray MP, Exchequer Secretary to the Treasury, has read this Tax Information and Impact Note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.