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Finance Act 2012


1.Section 198 implements Article 13(1) of the Principal VAT Directive (2006/112/EC)("the PVD") by inserting a new section, 41A, into the Value Added Tax Act 1994 (VATA).

2.It applies to Government departments, local authorities and analogous public bodies who supply goods and services when acting within a legal framework, such as a statute, which applies only to them and not to private individuals.

3.Such bodies are not to be treated as taxable persons unless their exemption would lead to distortion of competition.

4.The exemption does not however apply to their engagement in activities described in Annex 1 of the PVD (“Annex 1”) unless those activities are carried out on such a small scale as to be negligible.

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