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HMRC internal manual

VAT Government and Public Bodies

Other local authority activities: contracted out leisure services: memorandum of understanding paragraphs 5 and 6

For … go to … For … go to …
paragraphs 1 and 2 VATGPB8520 paragraph 3 VATGPB8530
paragraph 4.1 to 4.6 VATGPB8540 Paragraph 4.7 VATGPB8550

5 Liability of supplies to users of the leisure facilities

Where supplies are made by a local authority

5.1 The supply of leisure activities will continue to be made by the local authority in circumstances where a DSO is set up or where a contractor is brought in to run the facilities as an agent of the authority. In these circumstances the local authority is liable to account for VAT on the takings at the standard rate for all supplies other than those that may be exempt under the VAT Act 1994, schedule 9, group 1(m) (note 16) (Single lets for over 24 hours and a series of single lets to the same person) - see Notice 742 Land & Property- and group 6 (education) - see Notice 701/30 Education & Vocational Training.

Where supplies are made by a NPDO contractor

5.2 The liability to account for VAT on the takings rests with the NPDO. Some supplies may be taxable and others eligible for exemption under the VAT Act 1994, Schedule 9, Group 1(m) (Note 16) and Group 6 (see paragraph 5.1 above), or Group 10 (sporting services supplied by non-profit making organisations and competition entry fees - see Notice 701/45 Sport).

Where supplies are made by an independent contractor

5.3 Where the contractor acts as a principal any supplies made to the users of the leisure facilities will be liable to VAT at the standard rate unless exempt under the VAT Act 1994, Schedule 9, Group 1(m) (Note 16) (see paragraph 5.1 above) and Group 10 (item 1) (competition entry fees - see paragraph 5.2 above).

Further supplies made by either contractor to users

5.4 There may be further supplies made in the course of operating leisure facilities such as room hire, crèche facilities and catering franchises. The liability of these will vary and may include additional exempt supplies.

6. Further advice

6.1 This memorandum covers only the basic arrangements that can apply to the operation of contracted-out local authority leisure services. Those involved should consult HMRC (see for details) if they require further guidance on any of these aspects, or if there is anything not covered specifically.