RCB/28/07 VAT treatment of contracted out local authority leisure services
Revenue & Customs Brief, Issue 28. 22 March 2007
The memorandum of understanding that was jointly agreed by Customs and Excise and the Chartered Institute of Public Finance and Accountancy (CIPFA) in 1991 was reviewed in 2006 and this Business Brief contains the revised version, which supersedes the earlier version (published in Business Brief 11/99). The revisions have been agreed with CIPFA.
1.1 This memorandum of understanding sets out how VAT is to be applied to the various supplies that can arise in the provision of local authority leisure services. The contents have been jointly agreed by HM Revenue & Customs and CIPFA. The primary purpose is to identify the types of supply that will normally be encountered and to confirm their correct VAT treatment. It should be noted, however, that the contents will be subject to review from time to time to reflect changing commercial practice and any VAT Tribunal or Court decisions in this area of the tax.
2.1 Local authorities may be involved in the provision of leisure services in a number of ways—
— by a direct service organisation (DSO) within the local authority's own leisure services department;
— through a non-profit distributing organisation (NPDO), eg a charitable trust or industrial and provident society, in which the authority may have a degree of representation;
— through a wholly commercial independently owned “for profit” leisure management contractor.
2.2 In the case of a DSO, all supplies continue to be