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HMRC internal manual

VAT Government and Public Bodies

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HM Revenue & Customs
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Other local authority activities: welfare: asylum seekers and refugees

At one time local authorities were required to house refugees and asylum seekers. They were entitled to recover any VAT on costs incurred in housing and providing lighting, heating, food and the like under section 33 (see VATGPB4000). This applied whether or not funding was received from the Home Office.

Section 116 of the Immigration & Asylum Act 1999 (IAA 1999) removed that duty from local authorities and made it the responsibility of the Home Office. However, the provision of housing by a local authority to the Home Office under the terms of the Act still represents a non-business activity.

Although section 100 of IAA 1999 requires local authorities and other bodies to provide the Home Office with housing if asked, it goes on to say that registered social landlords (RSLs), such as housing associations, are not required to act beyond their powers. In other words, RSLs can choose not to provide housing to the Home Office. Local authorities, on the other hand, have no choice. This is reinforced by section 101 which gives the Home Office the legal powers to compel local authorities to provide accommodation should they otherwise refuse. Consequently it is a non-business activity for local authorities.