Leisure Services Closures – VAT implications for Councils to consider

Councils have a huge amount to cope with at the moment in supporting our communities – people and businesses – at this time – so thank you – all of you in our local authority network. In a call last week it became clear that the closure of leisure centres as a result of Covid 19 will bring significant issues not just in revenue terms for councils that still run their centres in-house, but also for the third parties operating outsourced leisure services.

From our work across this sector it is clear that margins are tight for commercial third parties and with the concern that the closures may tip finances over the edge, as it were, we thought a note through our network would be helpful to any finance officer in case they have to deal with that fallout.

The key aspects that we think would be important to check from the VAT perspective would include:

• The nature of any arrangements should a third party operator collapse
• transfers of assets between parties,
• staff and
• the nature of any compensation payments
• Any potential VAT adjustments arising on capital works undertaken on the estate prior to transfer e.g.
• Capital Goods Scheme management implications
• Or capital projects in hand or planned
• Modelling the impact for the council (Partial Exemption De minimis levels) should leisure return in house and re-open at a point in time – this is in light of the Ealing Council VAT case which has given councils the ability to retrospectively apply the VAT Exemption on the basis that the Exemption would apply going forward on council run leisure services.

There are likely to be other VAT aspects to consider should such a significant event arise – this update highlights a few of the core VAT points that should be added to any Impact Assessment your teams may have to undertake.

The Centurion VAT team have implemented appropriate arrangements to maintain the safety of our staff and clients and your usual contact will be available via phone or email or use emailus@centurionvat.com where all of the team can see the query and make contact. Virtual meetings can take place by call or through applications like Microsoft Teams, Zoom or Webex.

To keep up to date on the VAT front do ensure you are registered to receive our VAT updates – you can do so on our website or use emailus@centurionvat.com stating “Opt in for VAT Updates”.

For the avoidance of doubt, the content recorded in this news article does not constitute formal advice and we do not guarantee the accuracy of any information provided at the time of reading. It is always recommended that you should seek professional advice before acting on any of the news articles or information included.