VAT will be charged on several services provided by Local Authorities with effect from Thursday next 1 July. The new regime is provided for in this year’s Finance Act and prompted by an ECJ case (Case C-554/07) taken by the Commission against Ireland. While the case had its genesis in competitive issues to do with the provision of car parking spaces, the ECJ ruling is far broader, resulting in VAT being applied to refuse and housing services also.
Local authority off-street parking will be liable at 21% but not on-street parking. The latter is seen as a regulatory activity rather than an economic activity and thus outside the scope of VAT. Other areas which will be affected to a greater or lesser extent will be housing supplies, waste disposal and many recreational services. In some instances, a VAT charge on the hire of facilities such as football pitches will not come into effect immediately as those charges are subject to Ministerial Order.
It is impossible to say what impact this will have either on consumer costs or on Exchequer receipts, not least because the levels of activity in these areas across the Local Authorities vary widely. However it is surely too much to hope that these costs will be absorbed by the Local Authority in question. The Exchequer Statement in October showing the VAT receipts for September will be the first firm indication of the impact of these new charges on the economy.
Chartered accountants in business and in practice should be aware of the new input credits which will be available from Local Authority invoices.