VAT treatment of sports facilities by local councils

HMRC has issued Revenue and Customs Brief 6 (2017) to provide information on how it will treat claims for VAT refunds by local authorities following the Court of Justice judgment in London Borough of Ealing which was handed down on 13 July 2017.

The Court of Justice of the European Union found, in the case of the London Borough of Ealing (Case C 633/15), that the UK had incorrectly excluded local authorities from the exemption for the provision of sporting facilities. Local authorities had been excluded from the exemption to ensure that there was no distortion of competition. However, the court decided that any restriction on those grounds had to be applied to both public bodies as well as private non-profit-making bodies providing sporting facilities. It followed that the local authorities were entitled to treat those supplies as exempt from VAT provided that they did so on a consistent basis. HMRC has accepted the decision.

The effect of the judgment is that councils can opt to make a claim for exemption on the sporting services that they supply to members of the public under the European VAT directive, with the effect that related VAT on inputs will be restricted unless it can be treated treated as insignificant. The alternative is that they can continue to tax those supplies on the basis of UK law. Whatever their decision, HMRC expects councils to account for VAT on a consistent basis. Consequently, where councils have opted to make a claim for exemption in respect of past periods, they will be expected to continue to exempt supplies in subsequent periods.

All claims must be made in writing to, stating the amount of the claim and the method by which it has been calculated by reference to documentary evidence in the possession of the claimant. Claims must also be broken down by prescribed accounting period and will be subject to the four-year time limit in section 80(4) of the VAT Act 1994.

Further details surrounding claims by local authorities on this issue can be found in VAT Information Sheet 08/17.