Council lends £1.3 million to cover VAT bill

ASOMERSET council has had to lend its arms-length operating company £1.35 million to cover an unexpected VAT bill for one of its commercial investments.

South Somerset District Council announced last May that it would be investing £9.84 million in a battery energy storage facility, allowing it to generate income by selling power back to the National Grid.

The batteries for the facility arrived in the UK from China in December, with the council being informed that VAT would not be charged on them.

But it has now had to cough up £1.35m for its own operating company after this advice proved to be incorrect. The operating company will eventually be able to reclaim the VAT, but it did not have the cash flow to cover the bill, so had to approach the council to pay it.

The authority has said its action has left taxpayers “slightly better off ” due to the interest it will earn from the loan being repaid.

Clare Pestell, the council’s director of commercial services and income generation, laid out the grounds for the short-notice loan in a written report to the council’s district executive committee on Thursday.