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Tony C
#1 Posted : 05/12/2018
Joined: 2/24/2018(UTC)
Posts: 22
Organisation: Bolsover District Council

Thanks: 2 times
My understanding is that the supply of services made by a Local Authority under a statutory obligation and not in competition with the private sector should be treated as non-business for VAT purposes, for example Environmental Health undertaking ‘works in default’ due to enforcement action, would be outside the scope of VAT.

In some cases we get agreement from the owner or occupier to carry out works and then recharge them. This is most common in cases of hoarding or filthy and verminous premises for instance, where the occupier is unable to handle the situation and in the interests of their public health we organise works. However, strictly speaking the works are not carried out in default of statutory notices, but instead are by agreement. Should we be charging VAT in these circumstances?

Other examples of recharges are public health funerals. We have a duty under legislation to undertake a funeral, where no one else is dealing with it. In some cases, we find there is an estate for us to make a claim against, so we are able to recover the costs incurred. Would VAT be non-business in these circumstances? (As a result of our statutory obligation).

In addition, Officer time can form part of the costs incurred. If we charge officer time for a statutory function, should NO VAT be charged? If we charge Officer time for works done/costs incurred by mutual agreement, should VAT then be charged?

In terms of non- business VAT and recharging costs, would there be any difference between a statutory power and a statutory duty?

#2 Posted : 17/01/2019
Joined: 3/27/2018(UTC)
Posts: 9

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Was thanked: 1 time(s) in 1 post(s)
Hi Tony,
Works in Default, I know that building works in default, such as making a building safe to the public are Out of Scope, whereas if the owner comes to the council pre-emptively, the work is standard rated. This leads to the paradox that if the tenant is aware, then there is no incentive to get the work done until it becomes a statutory work in default, as then they don't need to pay the VAT. I assume the same applies for environmental work, but I'd seek clarification.

Funerals - I believe would be Out of Scope due to your statutory obligation.

I would say the test of whether it is Out of Scope or Standard rated is whether the service or officer time you are charging was necessary to complete your statutory service. Anything requested above or beyond this would be vatable.

Statutory Power vs Duty - I'm not sure how this difference would manifest itself? If only the council has the statutory power to do something, then there is no competition and it will generally be Out of Scope. Have you got an example?
Tony C
#3 Posted : 17/01/2019
Joined: 2/24/2018(UTC)
Posts: 22
Organisation: Bolsover District Council

Thanks: 2 times
Thank you David for the first to respond.

As I had a short timescale to reply to the query, I contacted HMRC in December 2018 and they advised -

If you are asked to deal with the enforcement action then this would be standard rated. If the council deal with it as part of their statutory duties then this would be non business (outside scope).

With regards to funeral costs, assuming it is only a coffin, hearse and cremation or burial (i.e. no flowers, head stone catering etc.) you would not have been charged VAT so nothing to pass on.

There is no difference in VAT treatment between a statutory power and a statutory duty.
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