In a letter seen by letsrecycle.com, Blackpool commercial waste manager John Paul-Lovie wrote to one of the council’s customers in June announcing that the council ‘should have charged’ VAT on commercial waste collections conducted outside of its jurisdiction.
The letter included a ‘revised invoice’ for the client as of July 1 2015 that is inclusive of value added tax.
The Blackpool move comes against a background of an ongoing legal dispute as to whether local authorities should be exempt from levying VAT on commercial waste collections, which the Environmental Services Association has argued puts private firms at a competitive disadvantage.
At present, councils in England are exempt from charging VAT on trade waste collections under rules put in place by Her Majesty’s Revenue & Customs (HMRC) in 2011. However, the exemption is void outside of the council boundary.
The Blackpool council letter states: “It has been brought to our notice that, although VAT is not payable on trade waste collections from premises in the Blackpool council area, we should have charged VAT on collections outside the council boundary. Your premises are outside that boundary.
“It is therefore with regret that I ask you to find enclosed a revised invoice for the collection service from 1st July 2015 – 27th March 2016.”
It adds: “VAT is also payable on any extra collections above the contracted collections.”
Provisions
Commenting on the letter, Blackpool council said there are ‘many historic and new provisions’ open to local councils to collect trade waste.
It added it has been collecting trade waste from neighbouring Wyre borough council since its withdrawal from the market within the Lancashire Waste Partnership area in 2011. The activity has been conducted ‘in line with central administration and best value’ in the ‘immediate vicinity’.
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Asked by letsrecycle.com why the council had not charged VAT on backdated collections in the Wyre area, a Blackpool council spokeswoman said: “The council has already liaised with HMRC and are awaiting further guidance in relation to the issue around the application of VAT.”
The admission that Blackpool should have charged VAT outside the boundary could strengthen a case being proposed by commercial waste contractor Max Recycle case for a review of the VAT exemption rules.
Review
In December 2014, the Durham-based recycling firm applied for a Judicial Review to challenge HMRC – arguing the government is conferring ‘unlawful State Aid’ on councils (see letsrecycle.com story).
Max Recycle director Scott Hawthorne this week told letsrecycle.com that a tribunal hearing is still pending, and has written to the courts to investigate what has happened to the firm’s initial application for Judicial Review.
If its Judicial Review is granted and upheld by the courts, Max Recycle claims local authorities could be required to pay an estimated 20% of commercial waste collection revenues since the exemption was launched in 2011, plus any reclaims made on the basis VAT ought not to have been levied prior to the HMRC ruling.
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