Max Associates leads review into tax benefits for public sector leisure providers
Max Associates, a leading consultancy and project management services firm across the sport, leisure and cultural sectors, has entered into consultation with leading tax advisers and local government lawyers to review opportunities for local authorities delivering leisure services through a third-party operator to benefit from recent changes to HMRC’s treatment of VAT.
Lisa Forsyth, managing director at Max Associates, explains: “Initially, when HMRC announced VAT revisions back in March this year, it appeared that the only beneficiaries would be local authorities managing in-house leisure services. This was because the changes focused on the re-classification of services such as gym memberships and other facility visits as ‘non-business’. Since not-for-profit leisure trusts can reclaim VAT associated with activity income, there was no immediately obvious financial benefit for them.
“However, they do still pay corresponding irrecoverable VAT on expenditure. Some leisure operators are developing a new ‘Agency Agreement’, which could see an operator collect income on behalf of the local authority as its ‘agent’. In this scenario, income remains ‘non-business’ and therefore there are corresponding benefits on irrecoverable VAT on the expenditure.”
Forsyth said the impact for the sector could be huge. UK Community Leisure estimates that there are around 780 not-for-profit leisure organisations: “If all were to benefit from an agency agreement model with their local authority client, the anticipated financial benefit would be somewhere between £50k-£100k per facility, equating to a collective benefit of around £39m-£78m per annum.”
Max Associates is working with a team of leading VAT advisers from PSTAX and local government legal professionals from Trowers and Hamlins to consider the principals of how an agency agreement could be presented to bring savings to the partners, while also satisfying HMRC and meeting legal and procurement requirements.
- Those interested in understanding more can download the document below.
