VAT

Can VAT be recoverable on buildings owned by local authorities even when the local authority is not the accountable body?

It depends. For example a local authority may own a building which it makes available to the Sure Start programme. If it is required under the programme to refurbish the building, maintain it and provide the services, for example fuel and power, it can recover the VAT that it incurs. If another person is tasked with delivering those specific tasks then the local authority cannot recover the VAT

Note - there may be a further complication where the local authority is also tasked with delivering certain exempt services from the premises.

What happens if the local authority simply refurbish and or equip the building and then lease it or hand it over to Sure Start/children centres to provide Sure Start/children centre services?

Where a local authority simply refurbishes and/or equips the building and then allows a children’s centre to:

1. use it free of charge (or under a pepper corn lease with one of the partners), then the local authority can recover the VAT incurred on these costs.
2. if the local authority enters into a lease with one of the Sure Start partners, and has opted to tax that lease, then the local authority can recover the VAT
3. where the lease is exempt the local authority can again recover the VAT, subject to it not exceeding its 5% exempt supplies deminimis limit.

It is not clear on which capital items VAT can be recovered.

There is nothing particularly important about capital items, except to the extent that the person who owns the capital item might have to operate the Capital Goods Scheme. VAT recovery depends on the status of the person owning the item and its subsequent use.

Can a Sure Start programme/Children's Centre commission work and then pass the invoice to the local authority as the accountable body to recover the VAT?

No. The fact that a local authority may act as an accountable body is irrelevant. A local authority can only recover VAT in respect of a specific item of work it has been tasked to deliver. And then only if it has received a VAT invoice made out to it, which has paid for using its own funds.

Note - when the Sure Start programme/children centre partners award a local authority funds to carry out work, those funds become the local authority funds.