Background – VAT Recovery for a Parish Council 

A Parish Council, which was not registered for VAT, had secured £2.6m of section 106 monies to spend on a range of major projects.  The projects included the refurbishment of a community facility, which was not owned by the Council, as well as the construction of a pavilion to be owned and operated by the Council.  The Council approached PSTAX for advice on whether they would be entitled to recover the VAT incurred on the project costs.

Our advice and approach

We held a virtual meeting with the Council’s Clerk and Chair.  We reviewed the Council’s activities and advised on a structure which would allow it to recover VAT incurred on the community facility works.  Further, we identified that the Council would only be entitled to recover VAT incurred on the pavilion construction if it registered for VAT and “opted to tax” the site.  Without VAT registration, the Council would breach its Partial Exemption de minimis limit – losing the ability to recover VAT incurred on this part of the project, and potentially elsewhere within the Council.

Following the meeting, we provided a comprehensive report covering our discussion and advice.  We then worked with the Council to:

• Secure its VAT registration by completing the online application process ‘live’ via a shared screen to avoid the need for transmitting personal information. HMRC did not need to raise any queries or request any further information in processing the application. The VAT registration was approved and confirmed in under a month – significantly quicker than the 40 working day turnaround quoted at the time of application.
• Advise on the process required to formally decide to opt to tax the site, including drafting wording for Council meeting agendas and resolutions, and the evidence of the decision, which needed to be retained.
• Complete the forms for the Council to notify the option to tax to HMRC.

Since the registration, we have advised the Council on process changes required due to the VAT registration and held a follow-up meeting with the Clerk to support them in the successful submission of their first VAT return to HMRC.

Ongoing support

We remain in contact with the Council to offer them VAT advice and support with these projects, and any other issues that may arise.

This case study is provided for illustration only.  The VAT implications of major projects are not only dependent upon the nature of the project and funding itself, but also on the specific use of the site where the works take place and even the wider activities of the Council as a whole.  Each Council’s circumstances differ, and so bespoke advice on the facts for specific projects and Councils should always be sought.

Ready to protect your council’s project budget?

Book a no-obligation 20-minute VAT sense-check with our local council specialists, or ask about our Local Council Tax Club for ongoing helpline support (VAT, SDLT, Employment Taxes).

Send us a message · Try our 2-minute VAT Registration Checker to see if you should register.