The National Crime Squad and the National Criminal Intelligence Service were set up in 1998 and are paid for through a levy on police authorities.
Along with all local authorities, the regional crime squads that preceded the NCS enjoyed section 33 status enabling them to recover VAT on purchases.
But the new bodies were not set up with the same tax privileges.
The VAT ruling has pushed up the levy on police authorities. And according to a report by the police service expenditure forecasting group, which negotiates with the Home Office on behalf of police authorities, the additional cost next year will be some £7.6m.
The group claims this is the equivalent of losing nearly 300 police officers.
With home secretary Jack Straw attempting to bolster police numbers with his new crime fighting fund, any further loss of uniformed staff will be unwelcome.
Accountancy Age understands the Home Office is sympathetic to the service’s point of view. But despite ministerial meetings between the Home Office and the Treasury, the Treasury has so far refused to award the necessary VAT status.
A judicial review of the decision is now being sought by the two crime bodies and Greater Manchester Police Authority in conjunction with tax advisers Williams Jeffery Barber. It is expected to go ahead in the first part of this year.
Nick Burrows, a senior VAT manager with the consultants, confirmed this week that the consultants were organising a challenge to the decision not to award section 33 status, but refused to comment further at this point.
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