VAT: refunds to Tees Valley and West Midlands Combined Authorities
Published 7 November 2016
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Who is likely to be affected
The Tees Valley and West Midlands Combined Authorities which were established by Article 3 of the Tees Valley Combined Authority Order 2016 and Article 3 the West Midlands Combined Authority Order 2016 by powers conferred under section 103 of the Local Democracy, Economic Development and Construction Act 2009 (LDEDC).
General description of the measure
This change will entitle the Tees Valley and West Midlands Combined Authorities to claim refunds of VAT under the provisions of section 33 of the VAT Act 1994 (VATA) in respect of their non-business activities.
Policy objective
The section 33 VAT refunds scheme makes sure that VAT which can’t be recovered on purchases that support non-business activities, doesn’t become a cost to the local authority.
Background to the measure
Since VAT was introduced in 1973, local councils have been able to reclaim VAT under the section 33 refund scheme in VATA. Section 103 of the LDEDC allows the Secretary of State to establish combined authorities that consist of 2 or more local government areas. These combined authorities can assume responsibility for economic development, regeneration and transport across that area.
This measure allows the Tees Valley and West Midlands Combined Authorities to recover VAT in the same way as their constituent local councils.
Detailed proposal
Operative date
The measure will take effect from 7 November 2016.
Current law
Section 33(1) of VATA allows for refunds of VAT on purchases, acquisitions and importations made in support of their non-business activities to eligible bodies. Among the eligible bodies named in section 33(3) are local authorities.
The term local authority is defined in section 96(4) of VATA. This definition doesn’t include combined authorities.
The Treasury has the power under section 33(3)(k) to make orders specifying other bodies, so that they can also recover VAT under section 33(1).
Proposed revisions
The Treasury will make an order specifying the Tees Valley and West Midlands Combined Authorities as being bodies entitled to recover VAT.
Summary of impacts
Exchequer impact (£m)
| 2016 to 17 | 2017 to 18 | 2018 to 19 | 2019 to 20 | 2020 to 21 | 2021 to 22 |
|---|---|---|---|---|---|
| nil | nil | nil | nil | nil | nil |
Economic impact
This measure isn’t expected to have an economic impact.
Impact on individuals, households and families
There will be no impact on individuals and households. This measure will refund to the Tees Valley and West Midlands Combined Authorities the VAT paid on their non-business purchases. This is the same way that the constituent councils are refunded VAT.
This measure will have no impact on family formation, stability or breakdown.
Equalities impact
This measure will have no impact on any equality group.
Impact on business including civil society organisations
This measure is expected to have no impact on businesses or civil society organisations.
Operational impact (£m) (HM Revenue and Customs or other)
It’s not expected that making this change will incur any additional costs or savings for HM Revenue and Customs (HMRC).
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be kept under review.
Further advice
If you have any questions about this change, please:
- email marie.williams@hmrc.gsi.gov.uk
- telephone 03000 543187
Declaration
Jane Ellison 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.