Public bodies undertaking statutory duties like licensing are regarded as carrying out non-business activities, and therefore fees not VATable.
The VAT Notice "local authorities and similar bodies" states:
VAT Notice 749 wrote:
5.8.3 Issuing statutory licences, etc
Public authorities charge for various forms of licensing and approval in a broad range of public activities taking place in their area - for example, approving premises for civil marriages, registering childminders, issuing fire certificates, and licensing and registering firearms. In doing so, the authorities are empowered to act under special legal provisions that private traders cannot call upon. This is a non-business activity.