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HMRC internal manual

Company Taxation Manual

Particular bodies: local authorities: definition

For the purposes of the Corporation Tax Acts, ’local authority’ is defined at CTA10/S1130.  That definition includes all bodies which have the statutory power to bill, precept or make other demands for money from other local authorities where those powers are derived from those sections of the relevant Local Government Finance Acts specified at S1130.  This means that it includes town and parish councils in England (in Wales, Community Councils).

The definition also includes local education authorities in England, Wales and Scotland, education and library boards in Northern Ireland, and schools and colleges that are under local authority control (see CTM40895 for more on this aspect).

Where a body first makes a claim that it is a local authority within the exemptions (see CTM40855) it should be asked to provide details of the legislation under which it was established and/or gave it the powers to precept, bill or issue a levy as required in CTA10/S1130.  (This content has been withheld because of exemptions in the Freedom of Information Act 2000) .

In recent years a number of activities previously carried out by local authorities have been transferred into separate limited companies.  Examples of this are waste disposal activities.  Such companies are not within the definition of a local authority and are liable to CT in the normal way.  This is so even where all or part of the company’s share capital remains in the ownership of the local authority.

Similarly since 2002 many local authorities/councils have set up arm’s length management organisations (ALMOs). These not for profit organisations are meant to deliver better social housing. The typical ALMO set up by a council is a company limited by guarantee without share capital but with the council as its sole member.  ALMOs manage, repair, improve and maintain the council’s housing stock, while ownership of the housing stock remains with the council.  See BIM58210 for more details of their tax treatment.  They are not local authorities.