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Associations could be forced to pay backdated VAT
More than 500 housing associations could be forced to pay four years’ worth of backdated VAT, depending on the outcome of ongoing legal proceedings.
Payments company Allpay has taken Her Majesty’s Revenue and Customs (HMRC) to court over a recent ruling, when HMRC told the company it would have to collect VAT from all its clients from October 2011 to December 2015.
Housing associations have already begun to pay the charges, which will be issued monthly over the next four years. The first payment was taken out at the beginning of October. According to one estimate, this could cost some of Allpay’s larger housing association clients between £200,000 and £300,000.
Associations have been paying VAT on their bill payments since December 2015, when an HMRC ruling made it compulsory. Allpay is challenging this ruling, and so if it is successful, not only will associations avoid paying backdated VAT, but they will receive a refund of all the VAT collected since December 2015.
An Allpay spokesperson said: “Allpay is currently challenging HMRC on its ruling that bill payment transactions are subject to standard rated VAT.
“We fundamentally disagree with this imposition, which has seen VAT charged on transactions, including to housing associations, since December 2015. Should the original ruling be reversed, VAT collected since this time will be refunded to our clients, and will positively impact the wider industry.”
Allpay met with the National Housing Federation (NHF) recently to discuss the issue. The NHF has recommended that any housing associations that have contracts with Allpay should “consider their own position with advisors”.
John Butler, policy officer at the NHF, told Inside Housing: “We had a decent discussion. We made clear to Allpay that they need to explain the background as to why they are retrospectively reclaiming this VAT and they also need to set out further to the sector what their intentions are in terms of this court case, this third-tier tribunal that they’ve got upcoming with HMRC.”
Should Allpay’s challenge be successful, the ruling could have implications for other payments systems, including Paypal, which could be forced to repay VAT charged to their clients on bill payments.
HMRC has been contacted for comment.
Allpay works with 500 housing associations, according to its website, to provide systems for tenants to pay rent.
