£1m rebate victory for council in VAT wrangle

COUNCIL chiefs are celebrating after winning a windfall of more than £1 million following a VAT rebate.

The Government had been threatened with High Court action by local authorities over accusations that it had wrongly claimed the tax on certain council services over decades.

But Revenue and Customs has since handed back rebates — with Oldham Council receiving £759,000 with more cash to follow, which the Chronicle understands will give a final total of well over £1million.

It’s a major boost to council taxpayers and the cash-strapped authority that has made hundreds of posts redundant, but could leave the Government with a major blackhole in its finances.

Local authorities claimed the taxman had collected VAT on services that should be VAT exempt, and wanted the money back on top of compensation and damages.

The Chronicle has seen a four-page High Court writ in Oldham Council’s name for a claim of a minimum of £300,000.

It’s believed that 150 similar claims have been launched by councils since last summer that could potentially cost the Treasury an astronomical £75 billion, the equivalent to nearly 10 per cent of total public spending.

The rebates go back to 1973, the year VAT was introduced as a condition of membership of the European Union, and in some cases the courts are being asked for the money to be paid back with compound, rather than simple, interest that could multiply repayments five times.

The Treasury is reported to have set aside £5 billion to meet the claims.

The claims cover sporting and cultural services, such as charges to the public for use of municipal fitness centres, such as gyms, tennis courts and golf clubs and parking charges.

Oldham Council’s writ made three claims; on the basis of the defendant’s failure to implement the EU provision for sporting services exemption of the VAT directive between 1990 to 1994, for sports and recreational courses between 1978 to 1994; and for cultural exemptions between 1990 to 1996.

Councillor Lynne Thompson, Oldham Council cabinet cember for finance and resources said: “The way Oldham Council dealt with this is an excellent example of its commitment to taking control and effectively managing its budget, responding to an opportunity to reclaim money that is rightfully ours.

“I am happy to say that a budget revenue monitor that will go to cabinet at the end of March will show that the council has continued to recover additional money, which is good news for council taxpayers.”