778 DELEGATED POWERS REPORT NO.
SUBJECT: Control sheet
All of the following actions MUST be completed at each stage of the process and the signed and dated report MUST be passed to Democratic Service for publishing
All reports
Name of DSO Nick Musgrove 1. Democratic Services receive draft report
Date 23/03/2009 Name of DSO Nick Musgrove
2. Democratic Services cleared draft report as being constitutionally appropriate
Date 23/03/2009 Name of Fin. officer Clive Medlam
3. Finance clearance obtained (report author to
complete)
Date 23/03/2009 Name of Res. officer N/A
4. Staff and other resources issues clearance obtained (report author to complete)
Date Name of TU rep. N/A
5. Trade Union response received (Staffing
issues only) Date
Name of Legal officer Sheila Saunders 6. Legal clearance obtained from (report author to
complete)
Date 23/03/2009 Name of P&P officer Andrew Nathan
7. Policy & Partnerships clearance obtained
(report author to complete)
Date 23/03/2009 Name of officer Julie Pal
8. Equalities & Diversity clearance obtained
(report author to complete)
Date 23/03/2009 Name Clive Medlam
9. The above process has been checked and verified by Director, Head of Service or Deputy
(report author to complete) Date 24/03/2009
Name of DSO Nick Musgrove 10. Signed & dated report, scanned or hard copy
received by Democratic Services for publishing
Date 25/3/09 Name of DSO Nick Musgrove
11. Report published by Dem Services to website
Date 1/4/09
Officer reports:
Name of DSO
Nick Musgrove 12. Head of Service informed report is published
and can be implemented.
Date 1/4/09
Cabinet Member reports:
13. Expiry of call-in period Date
Name of DSO
Date 14. Report circulated for call-in purposes to COSC
members & copied to Cabinet & Head of Service
ACTION TAKEN UNDER DELEGATED POWERS BY OFFICER
(EXECUTIVE FUNCTION)
Subject
To appoint KPMG as advisors to assist
with re-claiming VAT from HMRC
Officer taking decision Director of Resources
Date of decision
24 March 2009
Summary To appoint KPMG as advisors and to undertake work
required to re-claim VAT monies from Her Majesty’s Revenues and Customs (HMRC) as a result of the ‘Fleming’ case.
Officer Contributors Catherine Peters, Head of Finance, Finance Support, Shared Services
Status (public or exempt) Public with separate exempt section
Wards affected Not applicable
Enclosures None Reason for exemption from
call-in (if appropriate)
Constitution part 3, section 6 Powers Delegated to Officers and Contract Procedure Rule 5.5
Contact for further information: Catherine Peters, Head of Finance, 020 8359 7142 Serial No. 778
1. RELEVANT PREVIOUS DECISIONS
1.1 None.
2. CORPORATE PRIORITIES AND POLICY CONSIDERATIONS
2.1 This contributes to the Council’s delivery of the following key priority of the Corporate Plan 2008/09 – 2010/11: More choice, better value.
3. RISK MANAGEMENT ISSUES
3.1 I have considered whether the issues involved are likely to raise significant levels of public concern or give rise to policy considerations and they do not.
3.2 Failure to appoint KPMG to carry out this work could result in the Council missing the opportunity to re-claim VAT previously paid.
3.3 At the time of appointing KPMG, officers were not in a position to estimate how much the claim could amount to and hence the resultant fees to be paid and this is why the DPR has only now been drafted. At present it is estimated that fees payable to KPMG maybe in the region of £65,000 but this is dependant upon whether VAT is recovered from HMRC and, if so, how much is recovered.. 3.4 The deadline for the submission of claims to HRMC is 31st March 2009.
4. EQUALITIES AND DIVERSITY ISSUES
4.1 There are no specific equalities and diversity issues directly generated by the selecting KPMG.
5. USE OF RESOURCES IMPLICATIONS (Finance, Procurement, Performance & Value for Money, Staffing, IT, Property, Sustainability)
5.1 There are no ICT or property implications.
5.2 The fee to KMPG is a contingent fee (no win, no fee). The fee is paid on the basis of any VAT successfully recovered - 10% of recoveries in respect of the Sporting exemption and 5% of any additional VAT recoveries in respect of all other claims.
6. LEGAL ISSUES
6.1 None in the context of this report.
7. CONSTITUTIONAL POWERS
7.1 Constitution Part 3 – responsibility for Functions – Section 6 – powers of Chief officers
8. BACKGROUND INFORMATION
8.1 On 1st May 1997, HMRC introduced a three year cap to prevent any VAT registered business from claiming any input tax it had incurred. Prior to this there was no time limit. Businesses had been able to put forward claims to HMRC for repayment of overpaid VAT, the correction of errors and late claims to input tax going back years. 8.2 The three year capping rule was introduced without a transitional period in which
businesses could put in a claim. Following this there were two appeal cases Michael Fleming t/a Bodycraft v RC and Conde Nast Publications v HMRC.
8.3 On 23 January 2008, The House of Lords published its long awaited decision in the above cases. These appeals centred on the validity of the imposed three year capping rules for input tax. In these appeals the court found that the introduction of the three year cap without warning was contrary to EU law. Consequently the courts found that until HMRC formally provided a reasonable transitional period in which businesses could submit any claims, the three year cap for input VAT incurred prior to 1 May 1997 did not apply.
8.4 In addition to this claims can also be made for output tax overpaid or over declared in accounting periods ending 4th December 1996. Generally speaking these claims to HMRC for the input and output tax are referred to as ‘Fleming’ claims.
8.5 Where HMRC policy has changed the VAT treatment, for example, in public Libraries where the hire of audio/visual materials was previously standard rated, this was changed to ‘non-business’ in 2003, businesses can go back further than three years and claim the VAT paid. For Barnet this meant that VAT could be re-claimed for Sporting and Cultural exemptions, catering, libraries, school vending machines, bulky household waste, memorial supplies at cemeteries, off street parking and excess charges for off street parking.
8.6 Barnet was contacted by three organisations who wished to assist in preparing the claims – KMPG – our current VAT advisors, Company A and Company B. An interview was held with the former two and details of the latter was submitted via e-mail followed by telephone discussions. Two (KPMG and Company A) offered the choice of fee being either fixed or contingent. The fixed fee would result in the Council making payments whether or not the claims were successful. It was
therefore agreed that a contingent no win, no fee was the better option as payment would only be made where claims were successful. This resulted in the choice of KPMG who provided the lowest quotation which represented value for money and the best available option for the Council.
8.7 The contingent fee quotations received were as follows:-
KPMG Company A Company B
Sporting exemption 10% 20% 20%
Additional VAT recoveries 5% 20% 5%
9. LIST OF BACKGROUND PAPERS
9.1 Comparison of fees submitted and Engagement Letter from KPMG. 9.2 Any person wishing to inspect the background papers listed above should
telephone 020 8359 7142.
10. OFFICER’S DECISION
I authorise the following action
10.1 The appointment of KMPG as VAT advisors to assist with re-claiming VAT from HMRC .
Signed Signed by Clive Medlam Director of Resources Date 24/03/09
