Blog

VAT Claim available for local authorities

Local authorities have been given the go ahead by HMRC to stop charging VAT on their leisure services, including those already supplied.

Following the outcome of VAT tribunal cases brought by three local authorities, HMRC have allowed a change to the VAT treatment of leisure services they provide.

To date, admission to a Local Authority provided leisure centre has been subject to VAT at 20%. Following the outcome of the VAT cases and a review of the impact of a change on competition in the sector, HMRC have changed their view on the correct VAT treatment of admission charges. Admission to qualifying facilities is now to be treated as a non-business supply and is therefore not subject to VAT.

Required to provide certain public interest activities

Local authorities are required to provide certain public interest activities under their statutory framework and relevant services are deemed to be non-business for VAT. HMRC maintained that leisure services were not provided under this statutory public interest framework and they were therefore provided on a business basis. Local authorities are specifically excluded by VAT legislation from the exemption from VAT for sporting services and therefore they had to charge VAT on admission fees.

The courts found that, contrary to HMRC’s thinking, leisure services are within the statutory requirements for local authorities to provide and therefore the income is non-business and outside of the scope of VAT.

Local authorities charging VAT on leisure can apply non-business treatment

Any local authority which has been charging VAT on leisure services is able to apply non-business treatment to leisure services going forward and also consider whether it is appropriate to make a claim for over charged VAT historically. They are now able to recover VAT under their normal claim for VAT incurred on non-business activities, so will not lose the ability to recover VAT on costs.

Please contact us below if you have any further queries regarding the information above:

    Posted in Blog