§ Charles HendryTo ask the Chancellor of the Exchequer, (1) what(a) discussions and (b) correspondence he has had with the Secretary of State for Education and Skills concerning the written encouragement issued by the Department for Education and Skills to Connexions partnerships to improve their tax efficiency; [169976]
(2) whether Connexions Service private contractors are able to reclaim VAT. [169980]
§ John HealeyHM Customs and Excise have clarified the VAT rules with DfES and Connexions. It is a matter for the DfES how funding for the Connexions programme is allocated, and a matter for individual connexions partnerships how they organise their VAT affairs.
Private contractors subcontracted to provide services to a Connexions partnership must charge VAT, and this means that under the normal rules they are also entitled to recover the VAT, they pay on the items they purchase.
Limited companies established by Connexions partnerships to deliver Connexions services are not carrying out any business activity and therefore do not charge VAT and are unable to recover any VAT they incur.
Local authorities tasked with delivering Connexions services will normally be able to recover any VAT they incur under section 33 of the VAT Act 1994, as they do for other services they deliver.