§ Mr. KidneyTo ask the Secretary of State for the Environment, Transport and the Regions how many local authorities are expected to be brought into liability for VAT by exceeding the 5 per cent. de minimis partial exemption limit; and how he intends that the additional cost to such authorities will be funded. [22992]
§ Mr. RaynsfordThe provisional Local Government Revenue Finance Settlement for 1998–99 takes into account local authorities' VAT liability for their statutory responsibilities. The previous Government introduced a change in VAT partial exemption rules which affected VAT liability on local authorities' exempt business activities. This came into effect on 1 April 1997, in order to ensure that local authorities accurately account for VAT and are treated on a similar basis to the private sector. Local authorities calculate the extent to which they have exceeded the 5 per cent. limit on an annual basis, and must make an adjustment in the next VAT return after the year end. The effects of the change in VAT partial exemption rules will not therefore be known until 1998–99.
We expect councils to find the budget for any effects of this change from within their provision for 1998–99.