Housing associations are in line for four years of retrospective VAT claims following an HMRC ruling that they are exempt from the VAT normally charged on advertisements for vacant properties placed on local authority Choice Based Lettings (CBL) scheme databases.

The CBL scheme allows people applying for a home to bid for properties advertised by the local authorities. Housing associations generally pay a participation fee in return for their housing being advertised on the CBL database, these fees historically being seen as liable to VAT at standard-rate. However, VAT incurred by housing associations on CBL participation fees is attributable to their provision of VAT-exempt social housing and so irrecoverable.

Following representations from CIPFA and other parties HMRC has now agreed that the advertising cost forms part of a local authorities statutory obligations and is outside the scope of VAT. This opens the way for housing associations, and in some situations other registered social landlords, to claim back VAT charged by local authorities over the past four years.

Gerry Myton, VAT partner at MHA MacIntyre Hudson said: 'It is an essential decision for the industry. Housing associations are already struggling to be efficient without much funds, lifting this tax barrier is an important sign that the government is supporting their efforts.'