Midlothian Council to get £7m back from HMRC

Wednesday June 28th 2023


Written by Local Democracy Reporter, Marie Sharp

Midlothian Council is expecting a tax rebate of nearly £7 million after successful claims against HMRC which go back as far as the 1980s.

A report on the council’s finances has revealed an estimated underspend on general services of £11m over the last financial year with the bulk of it coming from the VAT refund which is expected.

And at a meeting of elected members this week it was agreed to earmark an additional £3million in the wake of the rebate to carry out maintenance and repairs across the county to tackle ‘tired and rundown’ town centres.

Councillor Derek Milligan called for the extra funding to be used to deal with a backlog of repairs which had been cut back over the years including sports equipment and other public realm needs.

He said: “Generally (the funding would be) for the backlog of maintenance that we have seen over the years.

“We have continued to cut back in areas like this and you can start to see when you go around towns bus stops boarded up and seats busted, just generally the place is looking a bit tired and rundown.

“This would allow us to carry out improvements in town centres and catch up with the backlog of maintenance in leisure centres, schools and libraries.”

Council leader Kelly Parry backed his call for the funding to be set aside adding: “It is absolutely right that we take steps where we can to improve Midlothian.

“Midlothian is a fantastic place to work, live and visit and I hope that this will make a difference to our communities.”

Councillors were told that the council has two claims with HMRC for overpaid VAT on sporting activities – one dating back to 2009 from present time, and the other from between 1981 and 1989.

Officers said the claims had been subject to legal debate but in March this year the HMRC announced council leisure services could be treated as non-business for VAT purposes confirming the overpayments.

They told councillors: “The cumulative value of the claims is £6.279 million. Once HMRC have finalised their review, interest will be added to each claim.

“The estimated net impact amounts to £6.839 million and that figure is
included in the 2022/23 accounts.

“As the claims are not yet settled by HMRC the council has not received any cash.

However, there is now enough certainty that cash will be received to necessitate accounting for income due in 2022/23.”

Councillors were told the most recent of the two claims was expected to be paid quickly with the older one ‘a little more sticky’, however council finance chief David Gladwin said the longer it took to repay the money the more interest HMRC would have to pay.

The report to councillors asked them to approve the use of £2million from general reserves towards the council’s transformation blueprint which aims to tackle the projected five year budget deficit of £29million facing the council.

It was approved along with the amendment from Councillor Milligan requesting an additional £3million for the backlog of maintenance.

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