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HMRC internal manual

VAT Government and Public Bodies

Local government partnership programmes: accountable bodies

A funding body may insist that funds be paid to an ‘accountable body’ who will administer them. The accountable body is usually either

  • one of the partners, or
  • a separate company contracted with, or specifically set up by, the partners for the purpose.

Although the funding may be held by an accountable body it does not follow that the money becomes its property unless the first of the structures described at VATGPB6200 applies. Where other structures are adopted, the accountable body simply holds the funds as agent or trustee.

Often the Government Department funding the programme allows the accountable body to retain some money to cover its management and administration costs. Often there is a limit, typically 5%. In other cases the accountable body might charge actual costs incurred and possibly some overheads. In others, it might make no charge on the basis that the partnership is also contributing to its own aims. It is accepted that any amounts kept by the accountable body to cover its administration and management costs are generally outside the scope of VAT as it is not providing services to the partners.

This is probably best explained by the Tribunal’s decision in West Central Halifax Partnership Ltd (MAN/98/262). In that case the accountable body was a partner organisation in a government funded project. However, it and the other partners set up a company limited by guarantee, West Central Halifax Partnership Ltd (WCHPL), to deliver the project.

The Tribunal concluded that WCHPL did not make supplies to the accountable body and, even if it did, there was no consideration. This was on the basis that WCHPL did not undertake duties for the accountable body. Instead, and this is the important aspect, it was tasked with duties of its own as part of the general partnership arrangements to deliver the project. Any money used to pay for the WCHPL administration costs were part of government’s funding to the partnership bodies, including WCHPL. They were not payment by the accountable body for services.

It follows that any money retained by accountable bodies to cover their administration costs, are outside the scope of VAT as they simply cover the costs of their share of the initiative.