Supplying services to local authorities and VAT

Local authorities state they do not pay VAT, how does this impact on the supplier?

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A not for profit client has recently registered for VAT. The business supplies training to employers, including Local Authories and public services. Local authorities are stateing that they do not pay VAT.

However, HMRC VATGBP9500 states, 'Supplies to government departments and health bodies are subject to the normal VAT rules and so are generally treated the same as a supply to any other customer'

Any advicde appreciated.

Steven

Replies (3)

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By Paul Crowley
24th Mar 2021 12:39

They are liars
Ask them to show you an invoice from the stationers showing no VAT charged.

Still got the email or letter stating that?

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VAT
By Jason Croke
24th Mar 2021 13:24

Local Authorities do not have any special rules to avoid being charged VAT, they can reclaim input tax under s33 for their non-business activities (stuff they do for free like household bin collections and can reclaim input tax on their business activities (stuff they charge a fee for like parking) like anyone else.

Often with this kind of dispute, language is critical. A not-for-profit charity providing education and training, I'd expect to see their invoices VAT exempt because an eligible body (charity) providing education or vocational training is an exempt supply. Section 4.4 HMRC Notice 701/30
https://www.gov.uk/guidance/vat-on-education-and-vocational-training-not...

I'm not saying the charity is making exempt supplies, as we don't know what training the charity is supplying, but usually charity + education = exempt supply.

So the Local Authority might be saying they aren't expecting to see VAT on these invoices because "they do not pay VAT " (on education/training when its supplied by an eligible body) .... or the local Authority could just be wrong.

First things first, what is it that the client supplies to the LA and secondly, is the charity set up as a limited by guarantee entity with a no distribution of profit clause in their Articles? If no to both, they aren't an eligible body/charity.

What was the driving factor for recently registering for VAT, did they exceed the VAT registration threshold?

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Replying to Jason Croke:
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By Steven Leather
26th Mar 2021 10:16

Thank you Jason.
I'm still trying to establish if the training is 'vocational training'.
If it is then I will try to cancel the registration, if not they will need to charge VAT to LA's and all clients.
Many thanks
Steven

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