Rebate victory for council in VAT wrangle

Council chiefs are celebrating after winning a windfall 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 which the Rochdale Online understands will give a final total of £900,000 to Rochdale Borough Council.

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.

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.