Police and ministers challenge £23m VAT bill

Police Scotland is challenging a refusal by UK Treasury ministers to exempt it from value added tax, after the new national force was hit with a £23.8m bill for the financial year 2013-14.

Chief Constable Sir Stephen House told Holyrood's Justice Committee that he found the charge "bewildering" when none of the 43 forces in England & Wales are liable to VAT.

Police Scotland has a financial target of saving £1bn by 2026.

The Treasury's position is that while the predecessor eight regional Scottish forces were able to reclaim VAT under section 33 of the Value Added Tax Act 1994 because they were deemed to be funded by local councils, Police Scotland is classed as a national body funded by the Scottish Government.

However Sir Stephen pointed out that neither the Police Service of Northern Ireland, nor the National Crime Agency has to pay VAT.

Michael Matheson, the new Cabinet Secretary for Justice, who also appeared before the committee, described the situation as "unacceptable" and said he would pursue the matter with Treasury ministers "with vigour". The issue was a policy one on which they were free to take a decision.

The new Scottish Fire & Rescue Service has been sent a similar demand, amounting to £4m in its case.