13 December 2007 | Helen Gilbert
The Scottish Police Services Authority (SPSA) may have to pay a multi-million VAT bill if it goes ahead with plans to centralise ICT purchasing for its eight forces.
The authority, formed to make savings across the police service, is due to take over the procurement of ICT in April 2008.
Under section 33 of the 1994 VAT Act, local authorities and police boards do not pay VAT on most purchases (including ICT), but the SPSA could face millions of pounds worth of VAT charges because the body is not currently exempt.
David Mulhern, SPSA chief executive, said he was "well aware" of the VAT issue. "We have been in active dialogue with Revenue and Customs for some time to bring a resolution.
"Constructive discussions are ongoing and I am confident that we are ready to deliver an efficient and effective service to Scottish policing that will realise a single approach to delivery of ICT for the first time."
A spokesman for HM Revenue and Customs (HMRC) said "outside the limited and exceptional arrangements in section 33", public bodies should expect to pay VAT on their purchases in the same way as any other body pays VAT.
However, he added, there is a provision for a body that is not already included in section 33 to be added by Treasury order and said HMRC was awaiting confirmation on whether the SPSA is a police authority.
Liberal Democrat shadow justice secretary Margaret Smith described centralised procurement for police forces as a sensible course of action. "The individual forces are VAT exempt so it's common sense that the body now procuring resources for the forces should also be VAT exempt," she said.