Local authorities, government and public bodies

By Tolley
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The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Local authorities, government and public bodies
  • Public bodies
  • Non-business activities
  • Significant distortions of competition
  • Grants and statutory contributions
  • Pension concession
  • Power to provide refunds to certain persons

This guidance note provides an overview of the VAT treatment of supplies made to and from government and other public bodies. This note should be read in conjunction with the S33 bodies ― overview and S33 bodies ― VAT accounting guidance notes.

Public bodies

PVD Article 13(1) states that:

“States, regional and local government authorities and other bodies governed by public law shall not be regarded as taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with those activities or transactions. However, where they engage in such activities or transactions, they shall be regarded as taxable persons in respect of those activities or transactions where there treatment as non taxable persons would lead to significant distortion of competition. In any event, bodies governed by public law shall be regarded as taxable persons in respect of the activities listed in Annex 1 provided that theses activities arenot carried out on such a small scale as to be negligible.

(2) Member states may regard activities, exempt under Articles 132, 135, 136, 371, 374, to 377 and Article 378(2), Article 379(2), or Articles 380 to 390 engaged in by bodies governed by public law as activities in which those bodies engage as public authorities.”

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The intended effect of Article 13(1) is that government and public bodies arenot treated as ‘taxable persons’ when they undertake certain activities or transactions and these activities or transactions aretreated as being outside the scope of VAT, unless this would significantly distort competition. A ‘taxable person’ under EU legislation is a person who, independently, carries out an economic activity whatever the purpose or result of that activity. See the S33 bodies ― overview guidance note for more information.

2006/112/EC , Article 13; VATA 1994, s

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