Treasury urged to resolve costly tax rules

Treasury urged to resolve costly tax rulesOur Parliamentary Correspondent
The Cabinet Office has accused the Treasury of failing to sort out VAT rules, which prevent public bodies saving more than £100m by outsourcing corporate services.
A report from the Commons Public Accounts Committee, released today, accused the Cabinet Office of not having sufficient grip of the cost of its own shared services to encourage other departments to use them.
Some publicly funded bodies are unable to recover VAT when they buy shared services from external providers, which the Cabinet Office considered a barrier to the wider adoption of shared services ­ preventing £70m in annual savings in non-departmental public bodies and tens of millions of pounds in higher and further education institutions.
It said: ‘At the request of the Cabinet Office, HM Treasury has been examining the scope for a solution since May 2006, but it does not know when it might find one.’
The PAC said the Treasury could only provide a ‘broad assurance’ that this would be taken into account in future tax decisions by Chancellor Alistair Darling and complained the problem ‘repeats previous examples of VAT-related difficulties dragging on without resolution.’