A court has ruled that local authority leisure services in the UK – including health club memberships – are VAT-free in law, but will councils bank this windfall, or use it to promote physical activity?

In this issue of HCM, we highlight a court judgement in the UK which has ruled that local authority leisure services should not be subject to VAT.

On page 14, Nick Burrows, local government VAT expert and director at PSTax, explains the case in detail, including the points of law considered by the courts and the reasons for the ruling.

The upshot is that local authority leisure services that are managed in-house will no longer be required to charge, collect and pay VAT at 20 per cent on their income, while still being able to claim it back on costs. As Burrows says, “This is a rare case of an unqualified VAT win for local authorities.”

Added to this, the ruling means these services should never have been subject to VAT in the first place, so councils are now able to apply for rebates on tax paid.

With finances tight due to high fuel prices, this windfall will come as a relief to the 20 per cent of councils that are still managing their leisure services in-house, but the big question is whether the money will be shared in any way with communities, or whether councils will keep prices the same and bank an additional 20 per cent from every sale.

We hope some of this money will be used to encourage physical activity and wellbeing via subsidies or targeted free access, as numerous research studies have found that certain people – particularly from vulnerable communities – are deterred by cost.

Where councils make this choice, we urge them to monitor and analyse the effect this has on the wellbeing of those impacted, so we can better understand the way price reductions and subsidies improve wellbeing.

Understanding this is important, most especially given the courts ruled council leisure services should be VAT-exempt because they operate under a different statutory framework from the private sector – one that requires them to do all they reasonably can to prevent crime and disorder; improve their area’s economic, social and environmental wellbeing; safeguard and promote the welfare of children and; improve public health – including providing services or facilities.

Targeted subsidies can be life changing. My dad was given a free swimming pass as a child and through this, fell in love with the sport, competed, became a coach, teacher, lecturer and ASA Tutor, helped start various national championships and the British Swimming Coaches Association, as well as founding five swimming clubs and a swimming school. Largely as a result of that free pass.

So let’s sow some positive seeds with at least some of this money, giving more people the chance to live healthier, more active lives that benefit their communities.