The following sets out the VAT measures announced in the Budget 2006 of relevance to local authorities:

The Budget - 22nd March 2006

See also Customs and Excise budget notes.

Overview

This was a very quiet Budget in terms of VAT generally, and particularly in respect of VAT measures impacting on local authorities. We were anticipating some amendments to legislation to underpin the changes to the treatment of childrens welfare services announced in the last budget, but they did not materialise.

VAT Registration and Deregistration limits

From 1st April 2006 the VAT Registration and Deregistration limits will increase to £61,000 and £59,000 respectively.

Comment: This is only relevant to those authorities that have a trading company, or are responsible for managing the financial affiars of another entity.

Reduced Rates for Contraceptives

This measure announces a reduced Value Added Tax (VAT) rate of 5% for contraceptive products, effective from 1st July 2006. The reduced rate will apply to sales of all contraceptive products – including sales by retailers, vending machines or via the Internet – regardless of whether purchased by an individual or organisation such as a sexual health charity or the NHS.

Comment: Authorities that sell contracepive products should ensure that they reduce the amount of VAT that they acount for from 1st July 2006

Home Computer Initiative - Abolition

The Chancellor announced that the Home Computer Initiative will be abolished from 6th April. The real benefit of the scheme was the PAYE and NI saving as employee contributions were deducted from salary before tax. However, authorities could also recover the VAT making the cost of the computer cheaper to the employee. Arrangements entered into before 6 April will not be affected by the change.

See also Budget 2005.