In Chelmsford City Council v HMRC TC/2011/07816, the First Tier Tribunal (FTT) considered whether the provision of sports and leisure facilities by a local authority was subject to VAT at the standard rate.

  • Chelmsford City Council, previously Chelmsford Borough Council, (the Council) provided leisure activities at four leisure centres, generally on a ‘pay for play’ basis (i.e. no membership was required).
  • Activities included: swimming, ice skating, tennis, squash, table-tennis, badminton, football, gym and exercise classes, athletics and children's soft play.
  • The fees charged only covered part of the running costs. The Council provided the services in view of the social benefits brought by participation in sport and leisure activities. It could not measure its performance purely on a financial basis as the services were not provided with a view to profit.
  • In December 2010, the Council claimed repayment of approximately £900,000 overpaid VAT relating to between 2006 and 2010.
  • HMRC rejected the claim. The Council appealed to the FTT.

The Council put forward three arguments as to why the fees in dispute did not attract VAT: its supplies of sporting and leisure activities to members of the public were

  1. Not ‘economic activities’ and are therefore outside the scope of VAT.
  2. Provided by the Council in its role as a public authority acting under a special legal regime and therefore it is not a taxable person in respect of those supplies.
  3. Provided by the Council in its role as a public authority and therefore it is not a taxable person in respect of those supplies, by virtue of Note 3 Group 10 Sch 9 VAT Act 1994.

The FTT found that:

  • The provision of leisure, sporting and physical recreation facilities by the Council constituted the supply of services for remuneration, which meant that supply constitutes an economic activity within Article 9 of the Principal VAT Directive (PVD).
  • The supplies were made by the Council in its role as a public authority for the purposes of Article 13 of the PVD and as such it operates under a special legal regime.
  • The Council was not a taxable person in relation to its supplies of the relevant sports and leisure facilities, providing that such a treatment does not lead to significant distortions of competition. This matter will be determined at a continuation hearing if requested by the parties.

This was the nominated lead case for England and Wales, there being a number of similar appeals.


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Chelmsford City Council v HMRC TC/2011/07816 

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