financial code no. 4 – value added tax (vat) 1

Dumfries & Galloway Council Revision: 9:2 Finance & Procurement January 2017

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Financial Code No. 4 – Value Added Tax (VAT)

1. Introduction

This code is designed to bring together all current VAT legislation and guidance relevant to the Council. It is hoped that you will find it a useful reference document that will answer most of your questions regarding VAT. No guide can, of course, comprehensively cover every possible transaction that might be undertaken by the Council, neither can it state the law definitively - this is a matter for tribunals and the courts.

If you are unsure about the VAT treatment of income or expenditure seek advice DON’T GUESS

Contact the VAT Finance Officer.

Alan Gass ext 64319 or email [email protected]

2. An Introduction to VAT.

Value Added Tax (VAT) is a tax on the sale of goods and services. The tax is administered by Her Majesty’s Revenue and Customs (HMRC).

Dumfries & Galloway Council can reclaim from HMRC nearly all of the VAT added by suppliers to their invoices, which the Council has paid. VAT on purchases is known as input tax.

Equally the Council is responsible for adding VAT on to the charges for many of the goods and services that it provides. This VAT is collected by the Council and paid over to HMRC. This is known as output tax.

The Councils VAT registration number is 659 2420 25, (when quoted to an overseas supplier, this should be prefixed by GB). This registration covers all official activities of the Council, Pension Fund, Leader and Common Good Funds. It does not cover school funds or external funds whose position is explained in Section 14 of this guidance.

3. VAT Rates.

3.1 Business

This applies where the Council provides goods or services that are, or could be, in competition with the private sector.

Business activities may be:

Standard rated at 20%. All transactions are taxed at 20% unless the law specifies that they should fall into one of the other categories.

mailto:[email protected]


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Lower rated at 5% (Including domestic fuel and some types of energy saving works).

Zero rated. These are supplies that are chargeable with VAT, but Parliament has decided that the tax to be charged is zero. Examples include books, children’s clothing, most cold foods, and public transport. Any VAT on purchases relating to zero rated supplies can be reclaimed from HMRC by the Council.

Exempt. VAT is not chargeable on exempt supplies. Examples include many rentals / lettings, insurance, adult education fees.

In theory VAT is not reclaimable on purchases relating to exempt supplies; however the Council has special concessions which enable it to do so, at present.

3.2 Non-business (No VAT charged)

This generally applies to goods and services provided by local authorities where:

no charge or other form of consideration is made; or where a charge is made, this would not lead to significant distortion of

competition with other bodies.

Examples that may be treated as non-business include: statutory licences, certain testing fees, and certain welfare services.

3.3 Distinction between business and non-business activities.

HMRC have drawn up guidelines to try and distinguish between business and non - business activities.

A local authority can treat activities as non-business, when a charge is made, provided:

It is acting as a public authority carrying out activities under a special legal regime, rather than under the same legal conditions as those that apply to private traders.

AND

it would not lead to significant distortion of competition with other bodies. Significant distortion of competition is regarded as being when it places existing private traders at a commercial disadvantage, or deters would-be private traders from starting up businesses supplying similar goods or services in competition with the local authority.

If the activities that are being charged for don’t meet these conditions then they must be treated as business and the appropriate business rates (as above) used.

3.4 Application of VAT Rates


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A detailed list of the different VAT rates for the most common items of income and expenditure for each directorate is shown in the Appendices. It is likely, however, that some liabilities in certain areas will change in the future due to further activities being deemed to be business rather than non - business activities, in light of these guidelines.

The list is not comprehensive and if there is any doubt as to what the correct VAT code should be you should refer the matter to the VAT Finance Officer.

4. The Calculation of VAT.

To calculate the VAT on the price of goods or services which are standard rated for VAT and do not yet include VAT, multiply the price by 0.20 (20%)

Price without VAT 500.00 VAT (500 x 0.2) 100.00 Total price 600.00

To calculate VAT on the price of goods and services which are standard rated for VAT at 20% and where the price already includes VAT, divide the price by 6.

Price including VAT 200.00 VAT (200 / 6) 33.33 Price excluding VAT 166.67 5. VAT Indicators Used By Dumfries & Galloway Council.

VAT indicators are used to assist in accounting for the different types of VAT paid and received by the Council and to identify the different VAT rates set out above.

The indicators used by D&G Council (for income and expenditure) are:

20 Standard rate

5 Reduced rate

4 Zero rate

8 Exempt income

9 Non-business*

50 VAT only invoice

PF Pro-forma – see section 11.4

* VAT indicator 9 is also used for transactions not subject to VAT e.g. purchases from traders not registered for VAT, and transactions between Council services.


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6. Responsibilities For Accounting For VAT.

6.1 Introduction.

Finance is responsible for recovering VAT paid on all relevant goods and services purchased by the Council. By applying the correct VAT indicators for transactions and these being input to the Council’s accounting system, VAT is charged against an account managed by Finance, who then recover the VAT shown in this account from HMRC.

Special arrangements for recovery of VAT apply to local authorities, like Dumfries & Galloway Council. The Council can reclaim all VAT it has paid on most of the goods and services it has purchased.

Exceptions include motor cars, if not purely for business use, and certain purchases made in other EU countries.

If budget holders and their staff correctly code VAT it will not be charged against their budgets.

The Council also pays over VAT to HMRC that has been charged on goods and services that it has provided to customers.

6.2 Income Documentation

New cost centre/income codes combinations set up by Integra Nominal Ledger Team will be notified to the VAT Finance Officer who will assign the appropriate VAT indicator to the income. Income section will receive the new income codes from the VAT Finance Officer and update their records for the VAT indicators.

6.3 Purchase & sales invoices documentation.

Budget holders are responsible for ensuring that the correct VAT indicator is applied to all purchases. In particular, budget holders must ensure that the correct VAT indicators are shown on:

Invoices posted for payment through the councils various systems i.e Integra, PECOS, Milan, Frameworki;

Mileage and allowance claims; Petty cash claims; Invoices raised through the sales ledger; Transactions within local systems designed to record VAT on income such as

SCUBA.

All records relating to VAT, and the making of all VAT returns to HMRC, are the responsibility of Finance.


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7. Changes in the VAT Rate

Although changes in the rate of VAT do not occur very often, they can be introduced at very short notice. The VAT indicator(s) would be amended or changed in order to take account of the new rate.

Generally, all income should be coded with the new rate from the date of the change, even where charges have not been adjusted to take account of the change.

Further details will be issued by Finance when a change is announced.

8. Errors and Penalties

8.1 Introduction

HMRC periodically inspect the Council’s accounts. If they identify mistakes, they will ask the Council to pay any loss to HMRC, together with interest on the loss and, in some cases, penalties. Any such costs will normally be charged to the relevant budget holder.

Penalties may be up to 100% of the tax under declared, if it is determined that the mistake was careless or deliberate.

If in doubt contact Alan Gass, Finance at [email protected] for further advice.

8.2 Error notification procedure

Where errors involving VAT are found, prior to discovery by HMRC, if the total amount involved is less than £17,000 VAT, for the Council as a whole, it can usually be accounted for on the Council’s next VAT return, as a voluntary disclosure.

For errors amounting to over £17,000 VAT in total, HMRC have to be informed.

In order to facilitate this, Finance should be informed in writing of any errors which are discovered relating to past VAT returns, giving full details of the error including: income / expenditure codes (where applicable), the net amount, the VAT involved and the dates when the errors occurred, so that any amount can be included on the Council’s next VAT return, or notified to HMRC. Please mark all correspondence for the attention of Alan Gass, or email [email protected]. By following this procedure the Council will reduce interest charges, and avoid potential penalties.

9. Maintenance of Records.

Business records must normally be retained securely and in good order for 6 complete financial years. These include:-

orders and delivery notes; relevant business correspondence; purchase invoices from suppliers;




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credit notes; cash records and till rolls; invoices raised by the council; bank statements and paying in slips; annual accounts.

Finance will normally retain supplier invoices and will maintain the bank accounts and annual accounts. Budget holders must ensure that the other records are kept.

10. INCOME Goods and Services PROVIDED by the Council.

10.1 Introduction.

Where the Council provides goods and services to a VAT registered business it is required to provide a tax invoice to the customer. These must include certain information, as detailed below.

10.2 Tax invoices for amounts over £250 (including VAT):

A tax invoice where the total price including VAT is over £250 must include the following details:-

An identifying number e.g. an invoice number; The date of issue; The date of supply or tax point if different (see glossary); Name, address and VAT registration number of the supplier; Name and address of the customer; Description sufficient to identify the goods or services; The unit price of the goods or services (in the case of services this may be the

hourly rate or a price for standard services.) If the supply cannot be broken down into countable elements, then the total tax exclusive price is the unit price.

Quantity of goods or services, rate of tax and the amount payable; Total amount payable excluding VAT; Rate of cash discount (if offered); The total amount of VAT charged.

10.3 Tax invoices for amounts under £250 (including VAT):

Where the total price including VAT is less than £250, a simplified invoice can be used. It must include:-

Date of issue; Name, address and registration number of the supplier; Tax point; Description of the goods or services; Amount payable including tax; Rate of tax.


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10.4 Cash, credit card and cheque income

It is recommended that official receipts be issued for any cash or cheques, in excess of £5.00, received by hand, as soon as possible, preferably immediately after the income has been received. A record should be kept of any income received for lesser amounts.

10.5 Exempt income

All income that is exempt from VAT, rather than non- business, should be coded 8 and not 9. All income that is exempt is identified as such in the attached appendices.

10.6 When to account for VAT on income

VAT returns have to be submitted every month by the Council to HMRC. It is important that transactions are included in the correct return. VAT return periods are to the last day of a calendar month.

The actual date (tax point), when VAT should be accounted for on goods and services, is the date of the invoice, (if one is raised), or when the income is received: whichever is the sooner. This must normally take place in the same (or occasionally next) VAT return as when the actual service took place, or the goods were removed.

Cash and cheque income should therefore be banked as soon as possible. Invoices should be raised within 14 days (or in exceptional circumstances two months), of the service being supplied, or the goods being removed.

HMRC charge interest if VAT on income is accounted for in a VAT return outside the set limits.

VAT is due on advance payments such as deposits for standard rated goods or services, as soon as they are paid.

11. EXPENDITURE Goods and Services RECEIVED by the Council.

11.1 Introduction

VAT registered traders who supply the Council with goods and services are required to provide a tax invoice to the Council whenever standard rated goods or services are supplied. The invoice must meet the requirements set out in section 10. Statements or photocopies of tax invoices are not normally acceptable. If necessary, ask the supplier for a duplicate.

Traders who have not registered for VAT cannot add VAT to the value of the goods and services they provide. Where goods or services are supplied by traders who are not registered for VAT, no VAT will have been charged to the Council; therefore, no VAT can be recovered.


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11.2 Central Accounting Payments System.

When a correct tax invoice is received by the Council it will normally be sent to Finance Payments Section for payment. Provided correct VAT indicators are written on the invoice approval slip by budget holders the VAT will be administered correctly, and only the net amount charged to the budget holder.

Care should be taken if items on a tax invoice are being allocated to different expenditure codes. In certain instances the tax invoice will show some items with VAT, and others where no VAT has been charged (for example some items are zero rated or exempt). Care should be taken to correctly identify these items, and allocate the correct VAT indicator.

The total VAT entered should always equal the total VAT shown on the invoice.

Purchases of over £250 must be in the name of the Council and / or the establishment. Where it is in the name of an individual (e.g. a member of staff) VAT cannot be recovered.

11.3 Incorrect tax invoice

Where a supplier fails to provide a correct tax invoice it should be returned to him for re-issue. Except when taking agreed prompt payment discounts, the price on the invoice before VAT is charged should never be altered. The amount of VAT must never be changed.

11.4 Pro-forma invoices and Authenticated Receipts

Sometimes the supplier will issue a ‘pro-forma’ invoice. This will either exclude VAT or, more commonly, state ‘this is not a tax invoice’. VAT cannot be recovered on these documents and should be coded PF. When, perhaps at the end of the contract, a taxinvoice is subsequently received, this should be sent Finance with a request for a VAT adjustment.

Some contractors in the construction industry operate under an authenticated receipt procedure rather than issuing pro-forma invoices. Under this procedure VAT can be reclaimed by the Council on a stage payment as soon as the request for payment / interim valuation has been paid, and received by the contractor.

The supplier should then send the Council an authenticated / signed receipt as soon as he receives the payment.

The receipt takes the place of a tax invoice and should show all the particulars normally required on a tax invoice - it provides the Council’s evidence for reclaiming VAT.

The Council has a requirement that no further payments should be made to a supplier until an authenticated receipt has been returned.


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11.5 Petty Cash (Imprest) accounts

VAT will be charged on many types of expenditure paid for out of petty cash accounts. The Council can recover the VAT element provided that the evidence of VAT on the purchase is acceptable to Revenue and Customs. Except for telephone call boxes and off street parking, VAT can only be recovered if there is adequate documentation.

For cash purchases of less than £250, a receipt will be acceptable, providing that it includes all the details required on a simplified tax invoice in section 10 above.

Some tills use a symbol such as an asterisk to identify standard rated goods on till receipts. Such receipts are acceptable as tax invoices if they contain the address and VAT registration number of the supplier and are for less than £250. If the till receipt does not contain all these details, purchasers can request a proper tax invoice in appropriate cases. If a receipt is not available, VAT cannot be reclaimed and should not be included as VAT on the invoice batch or petty cash return.

11.6 Buying Goods From Abroad.

Imports from inside the EU (The reverse charge).

VAT is due in the country where the purchaser of the goods is located. In the case of the Council, this will normally be the UK.

The invoice for goods purchased by the Council from a VAT registered trader in another European Country should show the goods as zero rated for VAT. The Council’s VAT number (659 2420 25) prefixed with "GB" must be shown on the invoice from the supplier.

11.7 Imports from outside the EU

VAT is charged and payable on the goods at import into the UK. VAT is in addition to Excise duty, and is calculated on the value of the imports including duty. A separate monthly invoice / certificate (Form C79) for reclaiming the VAT will be provided by Revenue and Customs. Provided Dumfries & Galloway Council’s VAT number is quoted by the shipping agent when the goods are imported, the certificate will be sent directly to Finance for inclusion in the Council’s VAT return.

Goods imported by post are covered by similar rules to other imports, duty and VAT being payable at import.

12. Transactions between Council Departments.

Transactions between different sections of the Council are not subject to VAT. This is because in the eyes of HMRC, Dumfries & Galloway Council is a single body.

The Pension Fund is included in the Council’s VAT Registration and transactions between the Council and the Pension Fund are not subject to VAT. Any transactions between Council departments should therefore use the non-business VAT indicator.


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Southwest Scotland Transport and external local charities are not covered by the Council’s VAT Registration. Goods and services provided by the Council to these bodies are subject to VAT. These bodies will also charge the Council with VAT where appropriate.

13. Transactions between local authorities and other public sector bodies.

13.1 Supply of goods

The supply of goods between local authorities is subject to the normal rules and the appropriate rate of VAT should be charged.

13.2 Supply of services

Supplies of services between local authorities which are not in competition with the private sector can be treated as non-business. However services must be treated as business and VAT charged at the appropriate rate if:

It is in competition with similar supplies in the private sector or It includes any supply of goods.

14. School Funds and External Bodies

Transactions where items are bought through school funds or external bodies cannot have their input tax reclaimed through the Council’s VAT registration.

School funds are separate from the Council’s funds.

For example, a school mini bus purchased with a grant made to a school, not the Council, is not a Council asset. Therefore the input tax related to its purchase cannot be reclaimed by the Council.

With external bodies staff should ensure they are registered for VAT where necessary. Expenditure and income cannot be treated as part of the Council’s VAT registration. External bodies must register for VAT where the level of their taxable outputs (standard plus zero rated) exceeds, or is expected to exceed, a specified limit in the past 12 months (£83,000 from 1 April 2016). They cannot de-register unless the taxable turnover falls below a specified limit in the last 12 months (£81,000 from 1 April 2016).

(Taxable turnover could include such items as: tuck shop sales, sales of uniforms and other clothing, sales of items donated to jumble sales, ticket sales to school plays, concerts etc., commission on school photograph sales, sales of equipment to staff and pupils through a school shop rather than in class, sales of mobility aids and other medical items to Social Service’s clients.)


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15. Donated Funds

The Council can reclaim VAT on purchases made from funds given directly to them for specific purposes provided that the Council:

Makes the purchase itself, i.e. places the order, receives the goods or services, receives a tax invoice addressed to the Council, and makes the payment;

Retains ownership of the purchase and uses it, or makes it available for its own non- business purposes; and

Keeps sufficient records to identify the purchase and the purpose for which it is to be put.

The above concession does not apply where the donation or funding is paid initially to another voluntary group or body and then passed onto the Council, and the goods are actually used by the voluntary group.

If the donor requires something in return for the donation, then VAT can be claimed on the purchase under normal VAT rules. However a tax invoice should be issued to the ‘donor’, with VAT where appropriate, showing what service is required in return for the payment.

16. Lottery and other Externally Funded Capital Projects

High value capital projects and externally funded projects (including lottery funded projects) can have complex VAT implications. There is a danger that if too many projects are undertaken at any one time, VAT will not be recoverable on all the related expenditure. The Council would also have to repay HMRC all the VAT incurred on other exempt income.

You should contact Alan Gass, Finance Officer email [email protected] at the earliest opportunity in order to obtain practical advice.

17: Supplies to Charities

There is no special VAT regime for charities and any services or supplies made by the Council to charities will follow the same rules as for other businesses.

Exceptionally supplies to charities may be zero rated but conditional on the type of supply, whether the charity is a “qualifying charity” and obtaining a certificate from the charity stating they are entitled to zero rating of the supply.

This can be a complex area and as such the VAT Finance Officer should be always be consulted before any such zero rating.


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Appendix 1 – VAT Checklist

Appendix 2 – Purchase card & expense claim VAT guidance

Appendix 3 – Council Certificate of Registration for VAT

Glossary of VAT Terms

The following explain the meaning of some of the more common technical terms used in a VAT context.

Deductible input tax - VAT charged by suppliers of goods and services which can be reclaimed by the Council from Revenue and Customs via its VAT return.

Exempt - These are supplies on which VAT is not chargeable. Examples include many rentals / lettings, insurance, adult education fees. In theory VAT is not reclaimable on purchases relating to exempt supplies. However the Council has special concessions which normally enable it to do so. (See partial exemption).

Exempt inputs - These are charges from suppliers for anything that is exempt from VAT e.g. insurance premiums, financial services.

Exempt outputs - Charges made by the Council on goods or services which are exempt from VAT e.g. financial services, adult education.

Inputs - Expenditure incurred by the Council on goods and services (excluding items such as salaries and wages to own staff).

Input tax - VAT charged by suppliers on goods and services purchased by the Council.

Non-business - Local authorities activities are considered to be ‘non – business’ if the service is carried out under a special legal regime and it is not in competition with the private sector. In these circumstances, VAT should not be applied to the transaction. VAT is still reclaimable on associated expenditure, however, under special provisions accorded to local authorities. (see Section 33 bodies).

Non – deductible input tax - VAT charged on purchases that cannot be reclaimed from Customs. The main items that the Council is unable to reclaim VAT on are motor cars which are not purely for business use, and certain hospitality expenses.

Opt to tax - Term generally used for land and property transactions where transactions which are normally exempt can have VAT applied at the standard rate provided permission is granted from Revenue and Customs. Also referred to as an ‘election to waive exemption’.

Outputs - Supplies of goods and services provided by the Council (for all rates of VAT standard rated, lower rated, zero rated, exempt, and non –business).


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Output tax - VAT charged by the Council on goods and services which are liable to VAT.

Outside the scope - Term used when VAT is not liable, for example all transactions carried outside the UK are ‘outside the scope’ of UK VAT.

Partial Exemption - Traders who have a mixture of taxable and exempt income may be partially exempt. If their expenditure relating to exempt activities is over a set limit they are unable to reclaim VAT on the expenditure relating to this activity and are regarded as being partially exempt.

The Council, as a local authority, has a special, relatively high, set limit. The limit is breached if input tax attributable to exempt activities is more than 5% of the total VAT incurred on all purchases in a year.

Place of supply - The place where a supply actually takes place. To be within the UK VAT system a supply must be made in the UK.

Reduced rate - A lower rate of VAT, currently there is only one reduced rate of VAT of 5%.

Section 33 bodies - Term used for local authorities and other authorities such as the police, fire etc. who by special concession under section 33 of the VAT ACT 1994 are able to reclaim VAT on non – business activities.

Standard rate - The normal rate of VAT for goods and services supplied by a registered person in the course of their business which are not specifically designated by law to be at another rate of VAT such as zero rated, exempt or reduced rate. The current standard rate of VAT is 20%.

Tax point - also referred to as the time of supply. The time when a transaction takes place or when VAT is due.

The basic tax point is when the transaction is considered to take place by the goods being removed or the service being performed.

The actual tax point is the date when VAT should be accounted for. This may be the date of payment, the date of the transaction, or the date the invoice is issued, according to specific rules.

Zero rate - These are supplies that are chargeable with VAT, but Parliament has decided that the tax to be charged is zero. Examples include books, children’s clothing, most cold foods, and public transport. Any VAT on purchases relating to zero rated services can be reclaimed by the Council.


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APPENDIX 1

The transactions listed below set out the VAT treatment of common transactions (both income and expenditure) which can apply to more than one Directorate.

Please note this is not a full list of transactions. If you are unable to find the transaction you are looking for contact the VAT Finance Officer for guidance.

Subjects are listed in alphabetical order.

THE VAT INDICATORS SHOWN ARE DUMFRIES & GALLOWAY COUNCIL’S FOR THEIR CENTRAL ACCOUNTING SYSTEM.

THE INDICATORS USED ARE:

20 - STANDARD RATE (20%)

5 - REDUCED RATE (5%)

4 - ZERO RATE

8 - EXEMPT INCOME

9 - NON-BUSINESS

SUBJECT COMMENT D&G VAT INDICATOR

Admission charges Admission charges to concerts, theatres, parks, museums, swimming pools, leisure centres etc., are generally standard rated.

Exceptions include long or a series of lets for sports facilities, and some special cultural events which are exempt (See appropriate headings for further details).

20

8

Advertising space Charges for advertising space in newspapers, journals, magazines and other publications are liable to VAT at the standard rate.

Advertisements placed in newspapers and other publications by charities are zero rated

20

4

Bad Debts VAT can be recovered on bad debts after a minimum of 6 months.

Bank Interest Income earned as bank interest is exempt from VAT 8

Barter Under normal circumstances, barter transactions are liable to VAT as if each was a separate transaction carried out at a fair market price. Please contact the VAT Finance Officer if you are involved in barter transactions.

20

Books Text books, library books, periodicals, leaflets and other reading matter are zero rated.

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Exercise books and other stationery are liable to VAT at the standard rate.

20

Breakages and dilapidations

Charges for damage, breakages etc. are regarded as compensation and are outside the scope of VAT.

9

Car Allowances VAT is only recoverable on the petrol element of any car allowance paid to staff for official use of their cars.

VAT is also recoverable on the petrol element of car allowances paid to Members, volunteer workers, or parents when using their vehicles for official council purposes.

Mileage allowance claims need to be supported with petrol VAT receipts sufficient to cover the official mileage being claimed.

Caravan Sites With the exception of the supply of energy all other supplies will be standard rated.

Supply of energy

20

05

Catering Catering services are standard rated. The following issues suggest that a service is catering:

It is linked to an event, function or social occasion; The trader identifies themselves as a caterer; The food is presented in a way that is different from a

shop or supermarket; The food is prepared in some way; The food should be for immediate consumption; The food is consumed on the premises where it is

sold; Hot take away food and drink is also considered to be

catering and liable to VAT;

Different rules apply for catering in schools

20

Children’s clothing Young children’s clothing and footwear is zero rated (other than certain fur garments), if less than various stipulated maximum sizes. In primary, infant and junior schools all official school uniform bearing the school name or crest is zero rated.

4

Cleaning Charges for cleaning services should include VAT unless they are part of an exempt rental, in which case they should follow the main supply.

20

8

Cleaning materials Cleaning materials are liable to VAT at the standard rate. 20

Computer discs, CDs etc Floppy discs, CDs, CD ROMS, audio cassettes, microfilm, video cassettes etc. are liable to VAT at the standard rate; this includes any textual information stored on the medium.

20

Conferences Attendance at conference 20

Contributions/ From a VAT point of view a contribution towards a cost may


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Recoupments/ Reimbursements

often be seen as a payment, in return for a service, and could be liable to VAT.

If the contribution is freely given and the contributor has received nothing in return no VAT is liable. (See donations).

If the contributor has received something in return for the payment then according to whether the service provided was non-business, zero rated, exempt or standard rated VAT may need to be added to the ‘contribution’.

Cultural Services Certain admission charges to museums, galleries, art exhibitions, zoos, theatrical musical or choreographic performances supplied by a local authority can be exempt, provided they do not distort commercial competition.

Joint ventures or profit making enterprises do not qualify for exemption.

The VAT Finance Officer should be contacted if consideration is being given not to charge VAT, as certain other stringent conditions also apply.

Damage to buildings Charges made to third parties to recover the cost of repairing damage to the Council’s property is non-business and not liable to VAT

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Discounts VAT is only chargeable on the actual price of goods and services. Therefore, where a contractual or prompt payment discount is given, VAT is only chargeable on the discounted amount.

Donated funds The Council can reclaim VAT on purchases made from funds given directly to them for specific purposes provided that the Council:

Makes the purchase itself, i.e. places the order, receives the goods or services, receives a tax invoice addressed to the Council, and makes the payment;

Retains ownership of the purchase and uses it, or makes it available for its own non- business purposes; and

Keeps sufficient records to identify the purchase and the purpose for which it is to be put.

The above concession does not apply where the donation or funding is paid initially to another voluntary group or body and then passed onto the Council, and the goods are actually used by the voluntary group.

Donations/ Sponsorship Donations of money or goods are not liable to VAT provided they are freely given, and nothing is required in return.

If the ‘donor’ requires something in exchange for the donation or sponsorship VAT is liable. A tax invoice should be issued to the ‘donor’, with VAT where appropriate, showing what service is required in return for the payment

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In the case of goods, VAT should be based on a fair market value of the goods.

Drinks See Food.

Education – Goods or supplies supplied that are closely related to the provision of education

VAT can be claimed on purchase of these goods.

When supplied to pupils for activities closely related to the provision of education they are non- business.

The following rules should be applied to determine whether

goods and services supplied by a local authority are closely

related to education:

• The goods and services must be closely related to the education provided. This means for the direct use of the student and necessary for delivering the education to him or her.

• The pupil must receive education from the local authority in either a local authority maintained school or in connection with some other local authority run educational activity, such as an orchestra.

• The goods and services required must be purchased from the local authority. This means that the local authority must hold title to the goods, and transfer ownership to the parent, guardian or pupil purchasing them. However, within that, the delivery address and point of distribution of those goods and services is a matter for individual local authorities to determine.

• Payment for the goods must be made either to the local authority or to the school. If paid to the school it must be paid into the school’s official funds.

• Some evidence, e.g. order form, must be kept to show that the recipient of the goods and services has been receiving education from the local authority, and that what has been supplied was essential to that education. The style of the order form can be tailored to the needs of the local authority.

• The price of the goods and services supplied must be at or below cost. There should be no intention to make a profit. “Cost” means the full overhead-inclusive price of supplying the goods and services to the pupil and includes, for example, the costs associated in administering the AIPS scheme.

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Electricity See Fuel.

Employees expenses Where the Council accepts responsibility for the actual expenses incurred by employees for subsistence, removal costs, legal costs, furnishings etc., and reimburses the precise amount, any VAT incurred can be reclaimed.

If the Council pays a contribution to relocation costs, the Council can recover VAT on the proportion paid.

VAT cannot be reclaimed if a fixed or flat rate allowance is


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paid in lieu of actual costs.

Exhibitions Income received in return for the hire of a site or space at an exhibition is liable to VAT at the standard rate, where the organiser can move the exhibitor to an equivalently sized plot elsewhere on the site

20

External Bodies Council staff who are involved in transactions which do not pass through the Council’s accounts need to ensure that such bodies are registered for VAT where necessary. Expenditure cannot be treated as part of the Council’s VAT registration.

External bodies must register for VAT where the level of their taxable outputs (standard plus zero rated) exceeds, or is expected to exceed, a specified limit during any 12 month period (£83,000 from 1 April 2016). They cannot de-register unless the taxable turnover falls below a specified limit (£81,000 from 1 April 2016).

External Bodies

Feed in Tariff (FIT) The payment is not consideration for a supply and is therefore outside the scope of VAT

9

Financial transactions Most financial transactions such as dealings with money, the making of loans and granting credit, securities for money, hire purchase credit, charges made for deductions from pay are exempt from VAT. Commission for arranging finance are generally exempt.

However investment advice, debt collection, and accounting services, are standard rated.

INCOME 8

EXPENSES 9

20

Fishing Licences These are standard rated for VAT. 20

Food and drink for human consumption

This is broadly zero rated.

All basic foodstuffs are zero rated.

Drinks such as tea, coffee, milk, bovril are zero rated.

Ice cream, confectionery, crisps, savoury snacks, and chocolate biscuits are standard rated.

Alcoholic drinks and soft drinks are standard rated

Hot food and meals eaten out are standard rated.

Food eaten on the premises is standard rated.

(Some supermarkets identify standard rated products on their till rolls with an ‘a’ or similar indicator).

4

4

4

20

20

20

Food and Drink/ Vending machines

Confectionery sold fromVending machines, kiosks or shops

Confectionery (sweets, soft drinks, crisps etc.) is liable to VAT at the standard rate.

There are separate rules for vending machines in Education establishments where if confectionary sold at cost or below the supply is zero rated

20

4


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Fruit Machines, Gaming machines

All income from amusement machines is standard rated. The net income from gaming machines is standard rated.

It is the owner of the machine who should account for VAT. In the case of gaming machines the gaming machine licence holder is seen as the owner - (this is normally the site occupier).

Where amusement machines are not owned by the Council and profits are shared with the machine owner / operator, the share of the profit is seen as rental for the space taken by the machine and is standard rated. Any charge for the rental for the machine itself is also standard rated.

Income from other forms of legalised gambling is generally exempt from VAT.

20

Freedom of Information Charges

If charges are made for the provision of information under the Freedom of Information Act, the charges are not liable to VAT provided that the information is only available from the Authority and it is obliged to be provided by the FOI Act.

Information provided which is available from sources other than the Authority or is not obliged by the FOI Act are standard rated

9

20

Fuel and power Charges to non- domestic users including community schools, for gas, electricity, oil and solid fuels are liable to VAT at the standard rate.

Fuel and power for domestic accommodation and non- business charity activities is charged at the reduced rate of VAT, currently 5%.

This includes foundation voluntary controlled and voluntary aided schools.

The lower rate also applies to a limited range of insulating products, as well as security goods and grant funded installation repair and maintenance of central heating systems, for qualifying pensioners.

Climate change levy is liable for all establishments where VAT on fuel at the standard rate applies. The levy is not recoverable.

Domestic use

Fuel is for domestic use when it is supplied:

To a house, flat or other dwelling or, To residential accommodation for students, children,

or the elderly or In a small quantity.

20

5

5


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Mixed use

If a property is used partly for domestic use, provided at least 60% of the fuel is for domestic purposes the whole supply can be charged at the reduced rate.

If less than 60% is for domestic use the VAT is split between the reduced rate and the standard rate according to the proportion used for domestic purposes.

Fund raising events Income from fund-raising events such as fetes, bazaars, and shows, run by charities or various other non-profit making, qualifying bodies can be treated as exempt from VAT, if:

not more than 15 events a year are held by the organisation, at any one location.

Or

It is a small scale event, where the gross takings are no more than £1,000 per week.

Such events organised by the Council themselves would not qualify for exemption.

Furniture The purchase and sale of new or second hand furniture is liable to VAT at the standard rate.

20

Garages See parking.

Gifts Gifts and awards to the Council’s staff such as long service awards, retirement gifts are considered to be non-business. VAT is recoverable on the purchase, and there is no VAT due on the onward supply.

For gifts over £50 in value given to anyone other than Council staff in relation to a business activity, the act of giving is considered to be a taxable supply and VAT is due on the cost of the goods. VAT is however recoverable on the purchase of the goods.

Grants to Voluntary Organisations

Grants of money to voluntary organisations are not liable to VAT provided they are freely given.

VAT can only be reclaimed on goods given to voluntary organisations provided they are purchased with Council funds.

9

Gratuities Gratuities paid to staff are not liable to VAT. 9

Harbours The provision of facilities for mooring, berthing or storage of a ship or boat is normally a standard rated supply.

However, if a boat qualifies as a ‘houseboat’ under the definition given at Item 2, Group 9, Schedule 8, VAT Act 1994, mooring facilities will be exempt.

20

8

4


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Mooring for a 'qualifying ship' may be zero rated

A ‘qualifying ship’ is legally defined as any ship:

• of a gross tonnage of not less than 15 tons, and • which is neither designed nor adapted for use for

recreation or pleasure

Hire Purchase. If possession of the goods transfers at some time in the future, VAT is due on the full value of the goods at the time of the supply.

There is a separate charge for interest – this is exempt from VAT. The hire purchase agreement often also serves as the tax invoice. This should be clear from examination of the agreement.

If the goods are returned, a VAT rebate can be claimed. The supplier should issue a credit note for the total invoice previously charged and issue a new invoice for the hire charges paid during the period of use.

Hospitality and entertainment expenses

Where these are incurred in connection with business activities, the VAT cannot be reclaimed. The invoice should be coded with the gross amount showing VAT indicator 9.

Where they are incurred in connection with carrying on non-business activities, VAT may be reclaimed – this includes expenses on civic visits under section 176 1(a) and 1(b) of the Local Government Act 1972.

9

20

Imports

Imports from inside the EU

Imports from outside the EU

VAT is due in the country where the purchaser of the goods is located. Normally in the case of the Council this will be the UK.

Where on occasion the goods are purchased from a VAT registered trader in another EU member state, the trader should show the Councils VAT number (659 2420 25) prefixed by GB on their invoice.

VAT will not be added to the invoice.

VAT is charged and payable on the import of goods into the UK, as if the goods had been supplied in the UK. VAT is in addition to Revenue and Customs duty and is calculated on the value of the imports including duty. A separate invoice / form for duty and VAT will be provided by Revenue and Customs.

Imports by post Goods imported by post are generally covered by the same rules as other imports.

Insurance premiums Insurance premiums charged by insurance companies are exempt from VAT. Insurance premiums may include insurance premium tax (IPT) – this is not recoverable.

8


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Interview expenses VAT cannot be recovered on the on hotel bills, subsistence costs and travel expenses of job interviewees, whether or not they are subsequently engaged.

9

Kitchen waste for animal feeding purposes

This is zero rated if sold for animal (excluding pet) feeding purposes and not requiring further processing; otherwise it is standard rated.

4 OR 20

Land and property This is a complex area of VAT.

New constructions of dwellings, (relevant) residential buildings and (relevant) charitable buildings are zero rated.

New constructions of commercial buildings are standard rated.

The sale and purchase of bare land and long lettings of land and property are usually exempt from VAT, although there is often the possibility to ‘opt to tax’.

All land and property transactions should be referred to Strategic Property Services in the first instance.

4

20

4 OR 20

Leaflets See books.

Lettings- Hire of room /hall with basic furniture only

Hire of room or accommodation, with basic furniture, is exempt from VAT.

8

Lettings- use of extra

Facilities

Any charge for additional equipment is liable to VAT. Examples include piano, lighting or disco equipment, etc.

Where a hire fee covers both room and facilities the charges should be apportioned reasonably between the two.

20

Lettings – additional services

Any additional charges made for services such as cleaning, caretakers, catering and refreshments provided by the Council are liable to VAT.

Where a hire fee covers both room and facilities the charges should be apportioned reasonably between the two.

20

Lettings – Hire of sports facilities including swimming pools

Individual lettings of less than 24 hours are liable to VAT at the standard rate.

Continuous lettings of more than 24 hours, to the same person, are exempt from VAT. Note if the lessee cannot get access to the facility for a continuous let of more than 24 hours the supply is standard rated.

A series of 10 or more lets to schools, clubs or organisations, with an interval of at least one day and not more than 14 days, are exempt from VAT.

The series of lets should be paid as a whole whether or not the right to use the facility for any session is actually exercised.

20

8

8


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Libraries Library fines

Sale of old books, publications and maps

Sale of old CDs/DVDs, talking books, internet use, pictures

9

4

20

Lotteries Lotteries are exempt from VAT. 8

Maps Printed maps printed on paper or cloth are zero rated.

Decorative maps printed or woven into textile articles such as scarves, tea towels, etc. are standard rated. Framed maps are standard rated.

4

20

Marina charges See Harbours

Membership fees/ Club subscriptions/ Trade Union fees/ Sports clubs

Subscriptions are normally standard rated.

If membership benefits include magazines etc., a proportion relating to this may be zero rated.

Subscriptions to Trade Unions, Professional bodies and political, religious, philanthropic, philosophical or patriotic organisations are exempt from VAT.

Sports club memberships of non - profit making organisations (excluding local authorities) are exempt for playing members, but standard rated for social and non- playing members.

Charges made to organisations for employee payroll deductions such as union dues, and subscriptions are exempt from VAT.

20 4 8 8

Mobility Aids These can be zero rated if sold directly to disabled persons. A declaration should be obtained from the disabled person.

4

Musical Instruments See - Education – Good or supplies supplied that are closely related to the provision of education

Newspapers Newspapers are zero rated. 4

Parking Off-street parking is normally standard rated, including excess charges.

For off-street parking, where the amount is less than £25, the VAT element can be assumed, and thus reclaimed, even though a VAT invoice is not available.

The letting of garages, unless they are let in conjunction with the letting of a house, are standard rated.

On-street car parking, including excess parking, is non-business.

20

20

20

9

Partnerships VAT implications should be considered at an early stage when planning partnerships, in order that bids for funding include any irrecoverable VAT- where appropriate.


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In some cases a partnership may be regarded as a separate entity from the Council. The Council will not be able to recover VAT on any of the partnership's expenditure.

In other cases VAT may only be recoverable on expenditure incurred by some of the partners, such as local authorities. Other members of the partnership e.g. voluntary groups, charities, or health authorities may be unable to recover VAT on all of their expenditure.

Contact the VAT Finance Officer for further details.

Pet Food Pet food is standard rated. 20

Postage and Packing If an additional charge is made for postage and packing, this is liable to VAT at the standard rate.

20

Postal services Most postal services provided by the Royal Mail are exempt from VAT.

With effect from 1/8/11 some Royal Mail services involving postal packets weighing more than 1kg will be liable to VAT at the standard rate.

Postal / courier services provided by private organisations are liable to VAT at the standard rate.

Where a supplier charges separately for post and packing this is standard rated (even if the post office is used).

8

20

20

20

Prescriptions etc. Eye tests are exempt,

Spectacles are standard rated.

Dispensing by a doctor of drugs, medicines or other goods on a prescription under the National Health are outside the scope of VAT.

Prescriptions dispensed by registered pharmacists are zero rated.

Private prescriptions are standard rated.

8

20

9

4

20

Printed matter Publications, pamphlets, magazines, newspapers, books, music scores, maps, programmes (unless for an admission charge), are zero rated.

Stationery items are standard rated.

4

20

Printing The supply of printing services to customers outside the Council is a business activity. The liability to VAT (standard or zero rated) follows the rules outlined above.

Private telephone calls Charges to employees for private telephone calls, including mobile phones are liable to VAT.

20


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Professional services Fees for professional services are liable to VAT in most circumstances.

20

Profile Plus Membership Adult membership standard rated

Child membership consisting mainly of sports tuition

20

8

Programmes Sale of programmes for entertainment and leisure events are zero rated unless they form part of the admission to the event, in which case they are standard rated.

4 or20

Public information Charges for Supply of information under the Local Government (Access to Information Act) 1985 are non-business including the first copy of a document or a replacement document.

Charges for information provided under the Data Protection Act 1984 are non-business and should not include VAT even if it includes photocopies that would otherwise be standard rated.

9

9

Radio Masts Rent of radio mast sites is standard rated 20

Rates Charges for rates / council tax are not liable to VAT. 9

Registrar Services Nearly all services provided are non-business

Commitment ceremony

9

20

Removal allowances VAT can be recovered on removal allowances provided a tax invoice/receipt is attached to the claim, despite the VAT invoices showing the employee as the customer.

20

Rents Rental income is generally exempt from VAT Where the landlord or the Council have opted to tax rental income is standard rated e.g. Lockerbie Cheese Factory

The VAT Finance Officer must be contacted in any case where charging VAT on rentals is being considered.

8

20

Rents – accommodation and associated garage

Charges for rentals for a garage in conjunction with an associated dwelling are exempt from VAT.

Rental of a garage by itself is liable to VAT.

Income 8 Expenditure 9

20

Royalties Royalty payments are generally liable to VAT at the standard rate if the author resides in the UK.

20

Sanitary towels and condoms

Sale of condoms are liable to VAT at the reduced rate.

Sanitary towels are liable to VAT at the reduced rate.

5

5

Second-hand goods/ Disposals.

Where surplus or second hand goods are sold by the Council, they should normally have the same VAT status as the original purchase. Thus furniture and equipment would be standard rated, and books zero rated. Sales of lost property, salvaged or recycled goods are also considered a business activity and


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the appropriate rate of VAT should be added.

See also vehicle sales.

Secondments See Staff.

Service / Maintenance charges

Other landlord charges

Service charges raised by landlords on leased properties for the upkeep of the external fabric or common parts of a building follow the same VAT liability as the rental (exempt, or standard rated, if the property has been opted to tax).

The same type of service charges on freehold properties are standard rated.

Other types of charges made to tenants that do not relate directly to the property e.g. insurance, rates, telephone, energy charges, may either follow the same liability as the property OR be standard rated OR are not liable to VAT. The different treatment depends on the terms of the lease and on whether the account is in the name of the landlord or the tenant. Contact the VAT Finance Officer for further details.

8 (or 20)

20

Software Purchasing & licensing is standard rate 20

Sponsorship See ‘Donations’.

Sports and leisure facilities

See- Lettings- (hire of sport facilities).

Staff Secondments normally involve the supply of staff, and as such, are standard rated and VAT should be charged. This includes charges to cover the pay bill, direct expenses (e.g. travelling) and overheads.

In some cases it may be better for the temporary employer to pay the employee directly, in which case VAT is not due, although the implications for the contract of employment must be considered. HR and the Pay & Employment services should be consulted in these circumstances.

However if staff are seconded under a special legal regime, that does not apply to anyone else, and are not in competition with other bodies, then charges for the secondment can be treated as non-business and are not subject to VAT.

The supply of teachers for educational purposes is exempt from VAT.

The supply of teachers to Compact initiatives, examination boards, or mentorship schemes are non-business.

In any other circumstance their supply would be standard rated.

From April 2009 employment agencies who employ and pay temporary workers as principal must charge VAT on the whole cost of their hiring out of staff, including the element for wages PAYE and National Insurance costs. If an employment

20

9

8

9

20


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agency acts purely as an agent and acts as an intermediary in finding work for their client and the worker has a direct contract with the Council, VAT will be liable on the introductory fee charged by the employment agency.

Stamps The sale of postage stamps is not liable to VAT. (Other than first day covers which are standard rated).

8

Stationery The sale of stationery items including greeting cards, stationery books, envelopes, and posters are liable to VAT at the standard rate.

20

Subsistence Where a flat rate allowance is paid to an employee, VAT cannot be recovered.

Where a receipt for accommodation or meals is being reimbursed to an employee, VAT can be recovered.

Where a contractor incurs VAT on subsistence he should include the subsistence as part of his standard rated bill to the Council.

Telephones / Mobile phones

Charges for private use of telephone calls, including any administration fee should include VAT, this includes any charges made by the Council to staff for private use of mobile phones.

Income from payphones is liable to VAT.

VAT is due on 1/6thhs (the VAT fraction) of the money removed.

The original purchase receipt for mobile phone vouchers can be used as evidence to reclaim VAT for the phone calls that were actually made using the vouchers.

For public telephones costs where the amount is less than £25, the VAT element can be assumed when reimbursing an employee, even though a VAT invoice is not available.

Television Licences Charges for television licences do not include VAT. 9

Ticket Sales These are normally made on behalf of a third party and the sales are therefore outside the scope of VAT

Commission on the ticket sales is standard rated

9

20

Trading Concessions/Franchise

Where these involve granting a specific area to the concession, charges are exempt from VAT.

Other concessions are likely to be standard rated.

8

20

Transport Transport of goods is standard rated.

Passenger transport in vehicles (including taxis) is standard

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rated if carrying capacity is for less than ten people (including the driver).

Passenger transport in vehicles with a carrying capacity of ten or more people (including the driver) is zero rated.

20

4

Trips

Educational visits.

School visits supplied to its’ own pupils as part of the curriculum are considered to be non-business and are not liable to VAT. With effect from 1st January 2010 VAT is no longer recoverable on trips purchased via a tour operator.

9

Trips –social services trips

Trips and holidays organised by social services establishments which are provided as part of statutory care are non-business and are not liable to VAT.

9

Trips – other

Tour Operators margin scheme

Where the Council provides visits / trips which are organised by a tour operator, the Council is merely acting as an agent. VAT is liable on any commission received.

If the Council buys in travel and accommodation facilities separately and resells them as a package it may be regarded as a tour operator, the same as Going Places or Thomas Cook, in which case complex VAT rules under the tour operators margin scheme may apply. Contact VAT Finance Officer for further details.

Unregistered for VAT-

Purchases from traders not registered for VAT

Traders who are not registered for VAT should not show a VAT number on their invoice, or add / include VAT to their invoices.

No VAT is reclaimable.

9

Vehicles

Cars

Purchase of cars outright by the council

Purchase of commercial vehicles

Under VAT regulations, cars include minibuses with fewer than 12 seats (including the driver’s). When purchasing a new motor car, VAT can only be recovered if there is to be no private (including home to work) mileage, or there is no possibility of the car being used for private mileage. Generally this limits the recovery of VAT on motor cars the Council has purchased to genuine pool cars and marked emergency vehicles. In all other cases the invoice must be coded with the total gross amount showing VAT indicator 9.

VAT is recoverable on commercial vehicles, vans, mini buses with 12 or more seats, etc. (Minibuses especially adapted to carry disabled persons in wheelchairs with no more than 5 seats for other persons including the driver can be zero rated. An eligibility declaration must be completed and given to the supplier.)

Contact the VAT Finance Officer for further details.

20 or 9

20


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Vehicles Sale of second hand cars –cars disposed of by the council

VAT must be charged on the full selling price, if VAT was claimed when the car was originally purchased. If no VAT was reclaimed when the vehicle was initially purchased (as the car was used in part for private mileage) the sale is exempt from VAT.

Vehicles

Sale of commercial vehicles, vans

VAT must be charged on the full selling price for all vans and commercial vehicles.

20

Vehicles

Leasing of cars

Lease terminations

Leasing a car from a leasing company is a business activity and should include VAT. When leasing a car, 100% of the VAT on the leasing charge can be recovered if there is no private (including home to work) mileage.

Where there is private use 50% of the VAT on the leasing charge can be recovered.

Leasing a car to an employee where the employee pays the full cost of the fuel used for private use is non-business. Where the employee does not pay the full cost of the fuel you must seek advice from the VAT Finance Officer.

Normally if a car is sold at the end of a lease, it is the leasing company who actually sells the car to the final purchaser, and not the Council. The Council may arrange the sale on behalf of the leasing company, but is only acting as their agent. The Council has to inform the leasing company of the purchaser’s details and the amount for which the car was sold. It is the leasing company who should then issue a tax invoice to the final purchaser.

A rebate may be paid by the leasing company to the Council at the end of the lease. Often the rebate is the same price as the vehicle was actually sold for. The rebate is usually paid in the form of a credit note. If the credit note includes VAT, the full amount of VAT should be credited if 100% of the VAT was recoverable on the original leasing charge. If only 50% VAT was recoverable on the original leasing charge only 50% of the VAT on the rebate need be credited.

Vehicles

Contract hire

For cars on contract hire agreements, VAT on the maintenance element of the contract hire charge is fully recoverable. The VAT on the hire element is 50% recoverable if there is any private use, or 100% recoverable if the car is used purely for business.

Vehicles

Car hire

This is normally standard rated. VAT can be recovered in full if

The hire is for 10 days or less and is purely for business journeys;

Otherwise only 50% of the VAT can be recovered.

Vehicles

Car Allowances

Where a car allowance is payable to an officer for the official use of his private motor car, the Council can reclaim the estimated element of VAT in his/her fuel costs. This recovery


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is taken automatically by the Council mileages and allowances system. Mileage claims need to be supported with petrol VAT receipts sufficient to cover the official mileage being claimed.

Vehicles

Mini-buses

The sale of a minibus with 12 or more seats (including the drivers) will normally be standard rated as VAT will have been recovered on its purchase.

Vehicles

Hire of mini -bus

Fees for the hire of a mini-bus alone should normally include VAT at the standard rate. The hiring fee can be zero rated if the minibus is hired to an organisation such as: a Health Authority, a non-profit making hospital, a non- profit making research institution, or a charity providing care or medical treatment for the blind, deaf, terminally sick or handicapped persons.

The hire of any minibus (12 or more seats) with a driver is always zero rated.

Vehicles

Fuel/Road fuel scale charges

VAT can be recovered on all fuel which the Council purchases for official business (including the petrol element of car user allowances see –above).

In the event of the Council reclaiming VAT in respect of fuel used for any private purpose (including home to office), road fuel scale charges would need to be applied. These are fixed charges paid each month via the VAT return, for each vehicle where VAT has been reclaimed on private mileage. Rates vary according to CO2 emissions figure and are listed in Public Notice 700/64.

If road fuel is used and allowances paid solely for official mileage, no scale charges are liable; however detailed mileage records, such as employee’s mileage allowances and expenses forms, are required to demonstrate that no private mileage has been undertaken.

Vehicles Maintenance

Vehicle maintenance carried out on Council’s own vehicles is non business

Vehicle maintenance carried out on third party vehicles is standard rated

9

20

Village halls If the Council uses its own funds to make a purchase in connection with village halls which it then gives away for no charge, VAT can be recovered. If however the Council uses grants awarded to other voluntary groups to purchase the goods or services VAT is not deductible. Please contact the VAT Finance Officer for further details.

Voucher schemes No VAT is due when the vouchers are given away to the holder, provided they are given free of charge.

The Council can reclaim VAT on the purchase of the goods, provided a proper tax invoice addressed to the Council is given by the supplier of the goods, and the purchase is accounted for through the Council's accounts. The amount of


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VAT reclaimable is limited to the value of the voucher or the amount actually paid, whichever is the lower.

Water and Sewerage charges

These are zero rated, except water supplied to industrial users, and mineral type water which are standard rated.


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APPENDIX 2

Purchase Card & Expense Claim Guidance

VAT LIABILITIES FOR ITEMS THAT MIGHT BE BOUGHT OR CLAIMED

The following is a list of items which might be purchased or claimed via expenses together with whether they are liable to VAT. Provided that the item is liable to VAT (i.e. VATable), the supplier is VAT registered, and the correct invoice / receipt is available showing a VAT number, VAT can then be claimed. The VAT liabilities of many items not listed below may be found in D&G Council’s Financial Code 4.

ITEM VATABLE AIR FARES NO ADMISSION CHARGES YES ALCOHOLIC DRINKS YES BASIC FOODSTUFFS NO BATTERIES YES BOOKS NO BREAD NO BUS FARES NO CAKES NO CAR REPAIRS YES CARRIER BAGS YES CATERING YES CATERING EQUIPMENT YES CDs YES CLEANING MATERIALS YES CLOTHING:

ADULTS

CHILDRENS UNDER SPECIFIED SIZES

YES

NO COFFEE NO CONFECTIONERY YES CONFERENCES

(But TRAINING NORMALLY EXEMPT FROM VAT)

YES

COMPUTER EQUIPMENT YES COSMETICS YES COOKING OIL NO CRISPS AND OTHER POTATO SNACKS YES DIY GOODS YES ELECTRICAL GOODS YES FLOWERS YES FRUIT NO FRUIT CORDIALS / SQUASHES YES FRUIT JUICES YES FURNITURE YES GIFT VOUCHERS NO


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HIRE CAR CHARGES YES

(Provided for 10 days or less & purely for business. Otherwise only

50% VAT can be recovered) HOTEL BILLS (UK ONLY) YES KEYS CUT YES MAGAZINES NO MEATS NO MEDICAL SUPPLIES ON NHS PRESCRIPTION

OTHER MEDICINES

NO

YES MILK NO MINERAL WATER YES MOBILE PHONE TOP UPS YES MOTs NO NEWSPAPERS NO PETROL YES RAIL TRAVEL NO RESTAURANT BILLS YES SOAP YES SOFT DRINKS YES SOFT FURNISHINGS YES STATIONERY ITEMS YES STORAGE RENTAL YES (including own specific space

e.g. Big Yellow Self Storage) STAMPS NO SWEETS YES TAKE AWAY FOOD (HOT)

but COLD TAKEAWAY ITEMS SUCH AS SANDWICHES, COLD PIES, SAUSAGE ROLLS, ETC.

YES

NO

TAXIS & OTHER TRANSPORT CARRYING LESS THAN 10 PERSONS

YES

TEA NO TISSUES YES TOILET ROLLS YES TOILETRIES YES TOOTHPASTE YES TOYS YES TV LICENCE NO WASHING POWDER YES WASHING UP LIQUID YES


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APPENDIX 3

financial code no. 4 – value added tax (vat) 1

Documents