LARAC criticised the attempt to launch a Judicial Review against the exemption as ‘not in the Christmas spirit’, and hit out at the Environmental Services Association (ESA) for backing the proposal.
Under current rules established by Her Majesty’s Revenue & Customs (HMRC) in 2011, local authorities do not have to pay value added tax on trade waste collections – which some private sector businesses believe puts them at a competitive disadvantage.
Earlier this month, the Durham Company and its subsidiary Max Recycle submitted an application for a Judicial Review into the HMRC decision, arguing the body was contravening EU competition law and claiming councils could be required to pay ‘millions’ in years of backdated VAT (see letsrecycle.com story).
But, LARAC argues overturning the exemption would see small businesses suffer – as many based in ‘rural and remote areas’ do not have access to the services delivered by the private sector.
Impact
The organisation also raised concerns that a ‘hefty’ backdated VAT bill on top of cuts to local government spending could impact on councils’ ability to deliver efficient household waste collection services.
And, while LARAC acknowledged that the VAT difference could be construed as unfair, it claimed that councils normally have higher central costs that their services need to cover –adding that household collections remained a ‘priority’.
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Commenting on the challenge to VAT exemptions, LARAC chair Andrew Bird: “Any income stream that a local authority can establish is a valuable one in the funding climate we are in. I am worried that if this review were successful local authorities might stop some trade collection services which would mean less, not more competition.
“Price, whilst important, is only one way in which services are marketed and private waste companies usually have the benefit of economies of scale to offset the small benefit local authorities may gain from the VAT situation.”
ESA
LARAC also criticised ESA’s decision earlier in the week to back the Judicial Review submission. The association had told letsrecycle.com that councils had been enjoying a price advantage in the market ‘for far too long’.
A spokesperson for LARAC said: “Given the geographical reach and size of the companies it represents, LARAC is disappointed that the ESA has been so quick to back the review and promised to work against local authorities on this, especially as the local authority market is so important to their members.”
A decision by the High Court as whether to grant the Judicial Review is expected in the New Year.
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