A VAT tribunal will decide a test case after Treasury officials decided they would not allow local authorities working on road schemes to claim back value-added tax.
East Renfrewshire Council will be a test case for authorities in Scotland, which have been hit with bills for VAT following a review by Treasury officials. The authority completed the M77 extension to create the Southern Glasgow Orbital last year. The project for the motorway involved extending the dual-two lane motorway from south Glasgow for approximately 16 kilometres to Kilmarnock, relieving the old A77, which had been the scene of numerous fatal accidents.
A spokesman for East Renfrewshire said the Treasury asked the authority for its accounts for the project in February 2005. The council did not hear anything back until February this year, when the Treasury hit it with a bill for £400,000. He said: ‘The deal we have had with the Treasury predates even this council, and has always been the way things have been done. Then, out of the blue, we get this demand for money. ‘It is all about the flow of money, but when it comes down to it, it is one arm of the Government pursing another for its own money.’
Crisis talks have also taken place this week between the Scottish Executive and Aberdeen City Council over a £2M VAT bill received this month for the western peripheral route, designed to take traffic away from the heavily-congested streets of Aberdeen. A spokeswoman for the executive said: ‘We fully back both Aberdeen City Council and East Renfrewshire in this. It has always been the case that authorities could claim back VAT.’ No date has yet been set for the hearing of East Renfrewshire case. A spokesman for the Treasury would not comment.
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