THE THREAT of a £250,000-plus tax bill over the way the new Red Lion Quarter was set up has been lifted after the taxman agreed to make the new Spalding centre exempt from its anti-avoidance laws.
Bosses at South Holland District Council heard the news on Tuesday – and say that it will now free the centre up to rent out the offices and shops which have been held up while the wrangle played out.
The way the council helped fund the £6.5million centre triggered complex tax rules designed by Her Majesty’s Revenue and Customs to catch firms in the private sector who were trying to avoid paying big VAT bills.
The council lobbied HMRC and MP John Hayes, a minister in the coalition Government, directly appealed to the Treasury on the matter.
If an exemption had not been granted the council would have been liable to pay VAT on all its spending by breaking its “de minimus” limit – a bill that would have topped £250,000.
Council economic development manager Bruce Wakeling said: “These rules weren’t designed to catch this sort of project, it was intended to catch people in the private sector who were setting up systems to try to avoid paying VAT.
“I was always reasonably optimistic but obviously until we had heard from them there was always that worry in the back of your mind.”
Mr Hayes yesterday hailed the announcement as a “good news story” for the district.
Mr Wakeling says the news is doubly good for the venue, which opened its restaurant and food court last month, because bosses can now go ahead with leasing out the shop and office units.
Two people have been given draft leases for the offices which, now the VAT wrangle has been solved, can be finalised.
Four other parties have shown an interest in the office units and another firm came to look at a shop unit last week. All of those can now be persued.
Mr Wakeling said: “This week’s news is a relief and it frees up another legal log jam.
“There were all sorts of potential legal issues and we needed to hear from HMRC before we could get on with a lot of other legal stuff.”
The anti-avoidance rules were brought in by the last Government after funding for the Red Lion Quarter had been agreed with the East Midlands Development Agency.