Local Authorities and similar specified bodies were entitled to recover input tax incurred in connection with their non-business activities under Section 33, VAT Act 1994. This entitlement did not, however, automatically extend to some public bodies and individual statutory instruments were required when each new authority was formed.
The change to Section 33 will allow the specified bodies to claim input tax on a similar footing to Local Authorities.
This will be effective from the date of Royal Assent to the Finance Bill 2017-18.
This will affect the following bodies:
- The Scottish Police Authority
- The Scottish Fire and Rescue Service
- Combined Authorities
- Fire and Rescue Service Bodies, which become a function of Police and Crime Commissioners (PCC)
Suppliers to these authorities will also now charge VAT on their supplies in the knowledge that these bodies will be able to recover it as input tax, which might affect commercial negotiations.