DLA Piper acts for Mid Ulster District Council in successful VAT repayment claim at First Tier Tribunal

DLA Piper has acted for Mid Ulster District Council (formerly Magherafelt District Council) in its successful appeal for refunds of wrongly paid VAT on leisure and recreational services, against HM Revenue & Customs, before the First Tier Tribunal. The Council won this decision as the lead nominated case on behalf of councils across Northern Ireland.

The case is important financially at a time when funding is limited, and the COVID-19 pandemic continues to cause difficulties for all across Northern Ireland. The precise amount of the VAT repayment still needs to be agreed and it is conceivable that HMRC could appeal the decision within 56 days, but provisional estimates are that HMRC will be repaying to Northern Ireland councils between GBP50 million and GBP70 million.

The First-Tier Tribunal (Tax Chamber) found that charges paid by members of the public, since 2006, for access to sports, recreation and leisure facilities provided by local authorities in Northern Ireland were outside the scope of VAT and the VAT should be repaid. The Tribunal agreed with the Council that supplies of leisure and recreational services to members of the public were provided by the Council in its role as a public authority acting under a special legal regime, within the meaning of the EU Principal VAT Directive. The Council was then able to demonstrate that there was no significant distortion with the private sector, as they could not possibly provide the same level and scope of services, to provide community equality, enhance community integration, and reduce social deprivation, without financial viability being primary. That meant no VAT should ever have been charged on the services. The tribunal rejected an alternative argument that the provision of the services was not an economic activity for VAT purposes.

Commenting, DLA Piper’s Tax partner Richard Woolich, said: “We are delighted for Mid Ulster and all the councils in Northern Ireland and the people of Northern Ireland who will benefit from this VAT repayment in enhanced services. This victory owes much to the hard work and determination of JJ Tohill (Director of Finance of the Council) and the skilful case preparation, tactical awareness and advocacy of Melanie Hall QC and Harry Gillow as well as the hard work of the DLA Piper team. This case could have wider implications for the circumstances when local authorities may be able to reclaim wrongly paid VAT, when they are obliged by local authority law to provide goods and services in the capacity of a public authority and those services do not lead to significant distortions of competition with the private sector.”

The DLA Piper Tax team was led by London-based partner Richard Woolich and associate Maud Murcia.