Councils can reclaim VAT on sports activities, court rules

Local authorities will now be able to reclaim VAT attributed to sports activities, a court ruling has determined. It comes as the First-tier Tribunal released its “long-awaited” decision this week in the ‘non-business sports’ appeals, in a move that will enable councils to “recoup millions in VAT”. KPMG welcomed the news, which will see that sports activities provided through leisure centres can now be provided free of any VAT. The FTT decision was “made on the basis that local authorities are acting as public bodies in providing these services and so cannot be recognised as making supplies in the course of any business”. Solicitors from KPMG Law UK represented Chelmsford and Midlothian councils, but the ruling “opens the gates” for other English, Welsh and Scottish councils to recoup millions in VAT. The result follows on from an earlier decision in 2017 from the European Court which had already opened the gates for some councils to receive VAT refunds. Richard Turnbull, tax partner for KPMG UK, said: “We’re delighted with the outcome. It’s a ruling that, beyond our clients represented, will mean many local authorities can supply these services free of VAT. “Amid the COVID crisis, local authorities’ belts are getting tighter, and this outcome could present a lifeline for authorities across the country who have had to look at cuts to services such as leisure to try to balance the books.” He added: “Unless HMRC appeals, the decision of the Tribunal should now create a level playing field for all local authorities across England and Wales, as VAT will no longer be a cost for public leisure services. “Beyond the practicalities, maintaining healthy lifestyles is high on everyone’s agenda now, so this decision represents much more than simple VAT savings.”