VAT ruling threatens police

13 Jan 00
Police forces in England and Wales could lose 300 officers as a result of a Treasury decision not to allow the National Crime Squad and the National Criminal Intelligence Service to claim back their VAT payments.

14 January 2000

The NCS and the NCIS are funded by a levy of 43 police authorities. On January 11, Home Secretary Jack Straw announced that the total levy would be £148.9m in 2000/01, a 7.4% increase on this year.

This high growth rate is partly to take into account an expected £7.6m VAT bill for the two national bodies, but will add to the financial pressures facing local police authorities which have no option but to pay the levy. The NCIS will receive £40.2m (an increase of 14.5%), while the NCS is expecting £108.7m (up by 5.1%).

An unpublished report by the Police Service Forecasting Group says: 'The police service is losing the equivalent of nearly 300 police officers as a direct consequence of this VAT ruling.' It calls for a radical reappraisal of police funding (see Public Finance, January 7-13).

Police authorities can reclaim VAT when carrying out their normal policing activities, but the Treasury ruled in May 1999 that the same arrangement should not apply to the two services. A judicial review challenging this decision, organised by tax consultants Williams Jeffery Barber on behalf of the NCS, the NCIS and Greater Manchester Police Authority, is expected in the next two months.

The Association of Police Authorities is also supporting the case. Executive director Catherine Crawford described the current situation as an 'oversight' in the legislation. 'It looks to us like an example of unjoined-up government,' she said.

The NCS, seen as a UK version of the American FBI, came into being in April 1998 as an amalgamation of six regional crime squads.

The NCIS, which gathers intelligence on serious and organised crime, became independent at the same time.

In the first year, both bodies were given a statutory concession which allowed them to be treated as police authorities and, hence, able to reclaim VAT. But, for 1999/2000 and 2000/01 the concession has been withdrawn, requiring VAT payments of £6.5m and £7.6m.

If the judicial review goes in favour of the two bodies, the APA is hopeful that its members will benefit. 'Although they can't formally repay the VAT to us, the two national bodies have said it will be reflected in future levies,' Crawford added.


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