Wigan market traders' delight as VAT wrangle gets resolved
The town hall will shoulder a tax burden so market traders will not be hit by rent hikes, bosses have said.
The move could bring an end to an ongoing dispute between the local authority and stallholders over the proposed imposition of VAT rates.
Members of the council’s executive cabinet voted to charge VAT – following advice from customs officials – but will refund borough traders who are not able to claim it back.
This could save traders hundreds of pounds a month and prevent them from going bust, councillors heard.
It will also protect the council from being hit with backdated costs from HM Revenue and Customs (HMRC) and ‘buy it some time’ as a test legal challenge on rates runs its course.
Council leader David Molyneux said: “This will give the opportunity to market traders to see that we do think they’re an important part of our future and it gives them a chance to get their businesses on the right track to compete in this modern day retail sector.”
Deputy chief executive and chief finance officer Paul McKevitt told a town hall meeting that the council had a ‘difficult decision to make’ regarding the proposed rent rises.
The town hall had been informed last year by HMRC that it should be charging VAT on market rents, he said, and if they did not do so they could be liable for backdated charges totalling around £700k.
However, there had been an outcry from stallholders who said the 20 per cent rise would see their monthly fees increase between £55 and £294.
VAT registered traders can claim the costs back from HMRC, but a majority of borough tenants do not reach the threshold for which registration is a requirement.
Authorities are waiting on a test legal challenge by Shrewsbury Council about the imposition of VAT rates.
Councillors were told the result could ‘change the landscape’, but action was needed in the interim.
There was no indication the Government will shift its position despite strong lobbying from national market organisations, Mr Kevitt said.
He added that the preferred option was the most ‘equitable’ although there would be a cost of around £176k to the council.
Members said the decision would buy them more time.
Coun Molyneux said: “The outcomes of the court case may change things, but this option is probably the best in terms of what we can deliver.”
If the council had opted to ignore the advice from HMRC to charge VAT, there would be a considerable financial risk, Mr McKevitt had informed members.
A report tabled for the meeting said: “If we did not take the advice there is a risk that at a subsequent visit, HMRC penalise the council for not charging VAT and make an assessment of the VAT lost.
“The council then would be liable for a backdated assessment of up to four years and interest. This would be in excess of £680k.
“We would be expected to raise invoices and try and recover this money from the market traders. It was felt that if this happened then this amount could not be passed onto the market traders.”
The outcome was extremely satisfying for the independent elected representative for Hindley Green who has taken on the market traders’ campaign.
Coun Paul Maiden said: “This is a good result, we have got quite a lot here. I wanted the VAT wiping completely but you take what you can in a negotiation.
“I have to give credit to Paul McKevitt. He has been spot on. He sat down and listened to everybody, which was all we wanted.
“If this had gone through it would have finished quite a lot of the market traders off. They could not have survived a 20 per cent increase in their costs.”