There are a couple of important developments we want to update local authorities about.

Top-slicing

Following representations from PSTAX (and others), HMRC seems to be shifting its position on the VAT treatment of top-slicing.

HMRC officers have withdrawn several local authority top-slicing assessments, including one that was the subject of an appeal and was on its way to the First Tier Tribunal (FTT).

The basis for HMRC’s shift is its acceptance of the arguments PSTAX and local authorities have submitted to HMRC since the dispute arose. We submitted to HMRC that basic VAT principles mean top-sliced funds cannot be consideration for a supply. Although HMRC says each case must be analysed individually, it is using these same basic VAT principles to justify its changed position. These principles will apply equally to all local authorities.

However, the revised position does not yet seem universal, as HMRC officers have declined to withdraw their assessments in some cases.

PSTAX is in contact with HMRC to try to resolve the position, and we will provide further updates when developments happen.

Administration fees – Tribunal hearing 15 and 16 September

Next week sees the long-awaited FTT hearing in the Portsmouth City Council (PCC) appeal. The dispute, which has been ongoing for over 10 years, concerns the VAT treatment of DFG admin fees. HMRC says they are payments for standard-rated administration services; PCC and PSTAX say they are payments for VAT-exempt welfare services.

The hearing is over two days, and we will update PSTAX Club subscribers shortly afterwards with our assessment of how it went.