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HMRC internal manual

VAT Government and Public Bodies

Other local authority activities: sport and leisure: operation of leisure centres

Local authorities may deliver leisure services as:

  • a direct service organisation (DSO) within the local authority’s own leisure services department
  • a non-profit distributing organisation (NPDO) such as a trust or industrial and provident society, in which the authority may have a degree of representation, or
  • a wholly independent ‘for profit’ leisure management contractor.

In choosing between these options an authority will be influenced by a number of factors including best value obligations for improved delivery and to save money.

In the case of a DSO the local authority continues to make the supplies and the VAT accounting position continues as before. Otherwise the various arrangements that flow from the contracting-out process can give rise to a number of potential supplies for VAT purposes. The various supplies and their VAT treatment are the subject of a Memorandum of Understanding. This is reproduced at VATGPB8500.