Recent significant changes to the VAT Treatment of Leisure Services 

VAT update & November Leisure Services Pop-Up Training 

In March this year, HMRC released Brief 3 (2023), announcing a significant change to the VAT treatment of Local Authority Leisure Services.

On 15 November, HMRC updated its internal Manuals to clarify the scope of the new non-business treatment. We have highlighted the key changes below.

The following can be treated as non-business

(summarised extract from HMRC Manuals). Read HMRC Guidance

Sports lettings

  • The hire of a sports facility by an individual or club for sports use, including a series of lets, previously covered by the ’10 or more lets’ rule.

Lettings of sports facilities to a business

  • For instance, aerobics or yoga instructors, five-a-side football league, etc. The non-business treatment will apply if the business uses the facility for individuals taking part in sport.

Lettings of non-sports facilities for sports use

  • For example, a village hall, community centre or school hall let to an individual or club to take part in a sports activity. The lettings will qualify for non-business treatment only if the authority has set up the room for use as a sports or leisure facility before the start of the hire period (see ‘Room/space hire’ below).

Long-term leases of sports facilities

  • The non-business treatment applies to leasing an authority-maintained and managed facility. However, non-business treatment will not apply to a simple sports facility lease where the tenant is responsible for its maintenance and management.

Letting a park for a sports event

  • Although authorities generally run parks under powers provided by other legislation, it is accepted that the hire of a park for a Parkrun, cycle race, etc., is sports use. The non-business treatment applies only if the authority has set up the space for the specific sports activity before the start of the hire period (see ‘Room/space hire’ below).

Sports tuition and sports-related education

  • For example, swimming lessons and sports coaching courses (including providing a sports coach to a third party to run such courses).

Outdoor pursuits centres

  • Where the supply is expressly one of sporting and leisure activities, such as canoeing, climbing, bouldering, etc., with instruction and/or equipment, this is within the scope of the non-business treatment. However, where the supply is not sports or leisure education, such as classroom-based learning, this is a supply of education that is exempt from VAT.

Letting of sports goods

  • The letting by an authority of appropriate sports equipment in conjunction with the letting of the sports facility to which that equipment relates – for example, badminton rackets, table tennis bats, ice skates, etc. – can be treated as closely related to the provision of the sports services and therefore treated as non-business.

HMRC has given two examples of activities excluded from the non-business treatment, namely:

Room/space hire

  • The legislation covers the provision of premises for sports, leisure, and recreational uses. However, where a room is not set up for participation in a sporting or leisure activity, it remains the hire of a space that will be exempt from VAT or taxable at the standard rate if the property is subject to an Option to Tax. HMRC’s example is when a club hires a room for a meeting or social event.

Sale of sports goods

  • Non-business treatment does not apply to selling sports goods – for example, shuttlecocks, tennis balls, swimming goggles, etc.

Several leisure providers are approaching authorities with proposals to adopt an “agency” outsourcing model. An agency model is designed to benefit from an authority’s non-business VAT treatment of leisure and the operational benefits of a provider supporting the service.

Implementing an agency model carries risks that HMRC does not accept the agent/principal arrangement. However, with careful planning and advice, an agency model might realise financial benefits for the authority and provider.

PSTAX Leisure Services VAT Pop-Up Training – 28 November

The VAT changes for Leisure Services, covering in-house and outsourcing questions.

During the Pop-Up Training events, we will cover:

  • the latest position on what services can be treated as non-business;
  • outsourcing – how might an agency model work, and what the risks are; and
  • what local authorities should do now?

The Training will be relevant to all local authorities providing leisure services, whether from leisure centres, schools and community centres, or outdoor venues and open spaces.

Event information:

  • Online on Teams – 10:30am
  • In-Person at the National Space Centre in Leicester – 1.30pm (with lunch included at 12.45pm)

Book your place here

PSTAX Pop-Up Training

Pop-Up training events are designed to give delegates a practical update to their VAT knowledge on topical events and developments. A programme of Pop-Up training events will be published soon, but we will add to these when developments occur with VAT implications.

Attending Pop-Up VAT training costs £150 for PSTAX Club subscribers and £167 for other delegates. A 10% discount is available for bookings for three or more delegates.

PSTAX Club subscribers can purchase and use Learning Vouchers for PSTAX Pop-Up training events.

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Stephanie Leitch

Written by Stephanie Leitch

With 10 years local authority accounting experience, Steph’s career began in the Accounts Payable team at Dorset County Council in 2008. Steph became the full-time VAT officer in 2016 and was later presented with the ‘Young Employee of the Year’ award for efficient VAT-planning work.

View all by Stephanie Leitch