(Draft) Tax information and impact note - VAT: refunds to Corporate Joint Committees
Updated 5 January 2023
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Who is likely to be affected
The Mid Wales Corporate Joint Committee, the North Wales Corporate Joint Committee, the South East Wales Corporate Joint Committee, and the South West Wales Corporate Joint Committee, which were established on 1 April 2021.
General description of the measure
This measure will entitle the Mid Wales Corporate Joint Committee, the North Wales Corporate Joint Committee, the South East Wales Corporate Joint Committee, and the South West Wales Corporate Joint Committee to claim refunds of VAT under the provisions of section 33 of the Value Added Tax Act 1994 (‘section 33’) in respect of their non-business activities.
Policy objective
Refunds under section 33 ensure that what would otherwise be irrecoverable VAT incurred on purchases to support the non-business activities of (mainly) local government bodies do not become a cost borne out of local taxation.
Background to the measure
Since VAT was introduced in 1973, local councils have been able to claim refunds of VAT under the section 33 refund scheme.
The Welsh Ministers are empowered to establish Corporate Joint Committees to provide a consistent mechanism for local government in Wales, to undertake strategic planning, collaboration, and delivery at a scale where it makes sense to do so. Corporate Joint Committees help to align the key strategic decisions which underpin the sustainable development and transformation of the Welsh regions as a whole.
These bodies meet the criteria for consideration by HM Treasury for addition to the section 33 refund scheme, and this measure will ensure that the four named Corporate Joint Committees can recover VAT costs in the same way as other local government bodies.
Detailed proposal
Operative date
The measure will have effect from 9 February 2023.
Current law
Section 33(1) of the Value Added Tax Act 1994 (‘VATA’) provides for refunds to eligible bodies of the VAT paid on purchases and importations made in support of their non-business activities. Among the eligible bodies named in section 33(3) are local authorities. The term local authority is defined in the VATA, however this definition does not include Corporate Joint Committees. HM Treasury has the power under section 33(3)(k) to make orders specifying other bodies that can recover VAT under section 33(1).
Proposed revisions
HM Treasury will make an order specifying the four named Corporate Joint Committees as being bodies entitled to recover VAT under section 33.
Summary of impacts
Exchequer impact (£m)
| 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 |
|---|---|---|---|---|---|
| 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
There is expected to be no impact on individuals as this measure only affects the four named Corporate Joint Committees.
This measure will 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 four named Corporate Joint Committees under the same scheme as local authorities. One-off costs for the four named Corporate Joint Committees are expected to be negligible but will include familiarisation with this change and the possible training of staff. Continuing costs are expected to be negligible, with any additional record-keeping forming a part of the normal VAT process.
This measure is expected overall 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 (£m) (HMRC or other)
It is not anticipated that implementing this change will incur any additional costs or savings for HMRC.
Other impacts
No other impacts 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, please contact David Smith on 03000 593922 or email david.smith7@hmrc.gov.uk.
Declaration
Victoria Atkins MP, Financial 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.