A group of housing associations in the Midlands are looking to save money on a huge scale, but may have to contend with the taxman before they realise their aims.
Any landlord be they social or private residential, will confirm that cutting costs are vital in managing a successful business. This is why they look for good, cheap landlord insurance and why they look to set up agreements with local tradesmen.
Three housing associations who operate in and around Birmingham; Bromford, Orbit and Midland Heart believe a European Commission directive enables them to create a separate company to provide services to each of them and other organisations, which should be exempt from VAT. The directive states that not-for-profit organisations can share services without being subject to paying VAT. The directive has not yet been introduced to the statute book in the UK, but the three companies have employed lawyers to table a “clearance application” to Her Majesty’s Revenue and Customs (HMRC) department enquiring as to whether they concur.
The companies thought the directive would be confirmed in the budget, but although George Osborne referred to the directive he did not indicate it would become law any time soon. A spokesman for the three companies said they believe the European directive holds precedence over English law and that “The new operating environment demands we find creative ways to deliver more and shared services are a crucial part of that mix.”
Lawyer firm Trowers & Hamlins who will represent the “Midlands Three” viewed the case thus; “This is about trying to force some sort of answer. While the Government has indicated it is reviewing the whole question of exempting shared services from VAT, it is, in our view, essential it is clarified urgently.”
The HMRC remained non committal about the case saying they would have to wait for the outcome of a Government consultation period before they could comment.