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HMRC internal manual

VAT Government and Public Bodies

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HM Revenue & Customs
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Section 33 bodies: registration and accounting: local authorities

Special registration requirements apply to local authorities (see VATGPB4250). Unlike businesses and other section 33 bodies (see VATGPB4910), local authorities do not enjoy the benefit of only having to register when they reach a certain turnover limit. Under section 42 of the VAT Act 1994

‘A local authority which makes taxable supplies is liable to be registered … whatever the value of the supplies…’

Consequently any local authority making taxable (including zero-rated) supplies in the course of business must register for VAT regardless of the value of those supplies. Nevertheless, our practice is to only enforce this where it is anticipated that output tax will reach £1,000 a year. This is to avoid the administrative costs of maintaining registrations for authorities whose only taxable supplies are the occasional disposal of assets, such as the sale of a lawnmower or computer by a parish council. Despite this an authority remains entitled to register in accordance with section 42 if they wish.

Separate VAT registration is normally required for joint committees or boards made up of two or more local authorities. However, as an alternative, they may account for VAT under the VAT registration of one of the member authorities, so long as this does not affect the revenue position. This approach will normally be applied in cases where one authority has responsibility for all the accounting records, or where separate registration would result in the partial exemption de minimis limit being exceeded.

Any joint boards or committees wishing to account for VAT on this basis are required to apply in writing to HMRC giving reasons for wishing to do so. Applications are judged on their own merits and approval is not generally refused. However, it will be refused where there is evidence of a tax advantage to the authority that is to account for the VAT that would not otherwise arise if the authority had undertaken the activity itself.

Separate VAT registration is also necessary for any committee or body which, although having close links with a local authority, is legally separate and is not eligible for section33 treatment. This will include housing trusts and enterprise agencies.