There have been many articles on the NYE referring to the VAT implications of the relationship between the Councils (ERYC and SBC) and YCBID. The Councils have always maintained that:
- they are AGENT on behalf of YCBID
- they just collect the money on behalf of YCBID
- it follows that YCBID is the PRINCIPAL
I recall that Mr JAMES CORRIGAN has challenged this position using the advice from his professional advisers, which forced the Councils to seek independent advice from the leading international accountancy and professional services firm KPMG. This report had been kept secret until it was published on the following FOI:
The FOI discloses in full the letter of advice from KPMG dated 15 November 2022 sent to Julien Neilson of East Riding of Yorkshire Council. The following paragraph is significant:
“Where collecting the levy, the Council is doing this in the capacity of principal for VAT purposes. That said, in calculating the amount of BID Levy payable to BIDCo, we understand the Council (in its capacity as the “billing authority” for the BID initiative) is charging VAT to the BIDCo on the amounts it deducts to cover its cost of collecting the BID Levy (i.e., akin to a collection service). This would seem incorrect as the Council would not be collecting the BID Levy on behalf of the BIDCo (as say an agent would), but on behalf of itself as principal.”
So now we know from the Council’s trusted advisers – The Council is the PRINCIPAL. It does not collect the BID Levy on behalf of YCBID, which is what an AGENT does. It collects it for itself as PRINCIPAL. This paragraph also refers to an error in the way the Council has charged VAT on the fee it has raised to the YCBID for its collection costs.
KPMG has confirmed MR JAMES CORRIGAN was right. I and many others expected that would be the case because it has been proved correct on everything he has said so far and readers may know there are others things bubbling away which, no doubt, he will be right about those, too.
I wonder what the implications of this fundamental error are. Here is my take on it:
1) The two Councils didn’t understand the law or the Operating Agreement with YCBID, even after it has been spelled out many times not least on the NYE.
2) They have issued invoices as AGENT incorrectly, so this must be rectified. If they do not:
a. the VAT they have claimed on the invoices from YCBID, which is £100,000s, will have to be repaid, and
b. more seriously, the demand notices sent to the Levy-payers have raised the Levy on the wrong basis so must be invalid. I wonder what the Judge will decide at the hearing in April?
3) An apology to MR JAMES CORRIGAN is certainly due, but these are Councils who refuse to admit mistakes or listen to those who actually know the truth.
On the back of the legal issues about North Bay Railway that were published in local media
this week, the last two weeks of SBC’s existence are looking rather grim for the legal department. What else will go wrong or come out before the Council is abolished? Perhaps the end can’t come soon enough.
It is a good job they are being disbanded as it appears that whilst the second paragraph on the Council’s Web page may have been true in the past, I will leave readers to come to their own conclusion about now.