Commentary

V2.108 Central and local government

Part V2 Registration – deregistration

V2.108 Central and local government

Classes of taxable person

V2.108 Central and local government

This paragraph examines provisions which provide that central and local government bodies are generally not to be treated as taxable persons for VAT purposes.

EU legislation—central and local government as taxable persons

UK legislation, in the form of VATA 1994, s 41A provides that where goods or services are supplied by a public authority, the supply will not be treated as a supply in the course or furtherance of business for VAT purposes where all of the following apply:

  1.  

    •     the public authority supplies the goods or services in the course of activities or transactions in which it is engaged as a public authority

  2.  

    •     not charging VAT on the supply would not lead to a significant distortion of competition

  3.  

    •     the activity does not fall within a specified class of activities (or it does but is on such small scale as to be negligible)

The UK legislation was derived from Archived Directive 2006/112/EC, art 13 which similarly provided (as at IP completion day) provides that states, regional and local government authorities, and other bodies governed by public law were not to be treated as taxable persons in relation to an activity or transaction if the above three conditions are met1.

The conditions are considered in turn below.

For the treatment of statutory functions as business or otherwise, see V2.203A and V2.213.

The public authority supplies the goods/services in the course of activities in which it is engaged as a public authority2

Two requirements must be

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