HMRC Policy paper: Changes to VAT treatment of local authority leisure services

Purpose of this brief

This brief explains a change in the VAT treatment of leisure services provided by local authorities.

Background

Local authorities are currently treated as undertaking a business activity if they provide leisure services to members of the public.

This treatment is based on the understanding that when local authorities provide leisure services they are not acting as a public authority. A local authority acts as a public authority when they’re carrying out their statutory public interest activities for the service of the community.

This treatment was challenged by a number of local authorities and the matter was considered by the courts.

This litigation has now concluded. The courts have found that local authorities’ leisure services are provided under a statutory framework and can be treated as non-business for VAT purposes.

The relevant cases are:

• Midlothian Council v HMRC [2020] UKFTT 433 (TC)
• Mid-Ulster District Council v HMRC [2020] UKFTT 434 (TC)
• HMRC v Mid-Ulster District Council [2022] UKUT 00197 (TCC)
• HMRC v Chelmsford City Council [2022] UKUT 00149 (TCC)

Source gov.uk

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