Third party maintenance of bus shelters vs advertising. Is this Barter?

I understand that HMRC has recently asked some authorities about the treatment of cases where a third party maintains bus shelters in return for advertising rights thereon.
I have looked at this situation within my district council and found an agreement whereby:
Third party has title of the bus shelters and maintains them. There is no charge from the Council to the third party for this. Subject to planning laws, the third party places advertisements on some of the bus shelters and receives income.
The Council does not receive a share of this income or a charge for the maintenance of the shelters.
The agreement does not mention VAT and there is no mention of the value of any non monitary consideration.
Presumably the district council is receiving a supply of maintenance as it is exercising it's power to provide bus shelters and obtaining maintenance from the third party in exchange for advertising rights, even though the third party has title.
Should the council and the third party be exchanging VAT only invoices in this case?
Can I ask please if others have similar arrangements and whether such arrangements are treated as separate supplies subject to VAT? Any thoughts on how to value the supplies would also be gratefully received.
  • I am aware that Clear Channel / Adshel replaced a number of our bus shelters in the 1990s with their shelters with illuminated advertising panels. Colleagues don't think we have any contractual relationship with the company nowadays. It sells the advertising space, keeps the income, and maintains the shelters. The company is not set up as either debtor or creditor in our financial systems.

    Is this the sort of arrangement you had in mind?
  • This is a typical barter arrangement. These are two distinct supplies and you should have been exchanging VAT only invoices with the other company. In not doing so you are at risk of being penalized for under declaring input & output tax for the last four years. This is despite that the net VAT payable/receivable will not change.

  • I don't agree, KG.... there are many possible arrangements, some of which might be a barter and some not; for example we have a clear ruling from HMRC that these are statutory licences outside the scope of VAT - it all depends on the precise nature of what is agreed between the council and the 'operator'....
  • Bearing in mind that my colleague who has responsibility for this council's bus shelters has no knowledge of any arrangement with Clear Channel, we probably wouldn't know where to start. We're a district council, and some of the shelters in the district are owned and maintained by our county council. My colleague wondered whether the arrangement (if there is one) might be between county and the company. It could take a bit of time to confirm whether or not we are even an interested party, though I do have a recollection that there was a licensing arrangement back in the 1990s.
  • Many thanks for your thoughts.
    Our arrangement is similar to MJ's description.
    The agreement states the target response times for maintenance of the shelters. I'm wondering if this would indicate that they are providing a service to the council, rather than maintaining their own shelters.
  • I've tracked down our 1998 contract with a forerunner to Clear Channel, and have been advised that it does look like a barter arrangement.

    Have any other councils in the same position been in touch with Clear Channel to discuss how this can be resolved? I'd appreciate contact details for the company, especially if they had a straightforward solution.