HM Revenue and Customs Brief 50/07
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Issued 13 July 2007
VAT: Court confirms HMRC’s policy on all-inclusive leisure facilities
Unlimited access to all leisure facilities in a leisure centre, typically in
return for a monthly or annual payment, is liable to VAT at the standard rate.
The Court of Session confirmed HMRC’s long-standing policy that an all-inclusive
scheme is a single supply of the right to use the facilities. The fee paid
cannot be apportioned between supplies merely because one or more of them would
be at a different VAT rate if charged for separately.
We understand that, for instance, local authorities and leisure trusts
sometimes attempt to apportion fees between VAT rates; an example is a local
authority apportioning between standard-rated sauna facilities and exempt
swimming tuition. However, the different VAT rates only apply if there are
separate charges for individual supplies of facilities. That is not the same
situation as an all-inclusive fee enabling use of a variety of facilities over a
period, even where there is a right to use services that would – individually -
be predominantly exempt.
The VAT liability depends on the nature of the supply, which has to be
decided at the time the all-inclusive fee is paid. At that time, there is only
one supply; there is no basis for identifying separate ones because the leisure
centre cannot know which the subscriber will use and how often.
The case considered by the Court of Session was The Highland Council (ScotCS
CSIH 36), which upheld a decision of the VAT & Duties Tribunal ( UKVAT
V19542). The Tribunal decided that the supply was "a single supply of a right to
exercise and enjoy the use of the Council's facilities as and when and to
whatever extent the purchaser required”. It went on to say "the exercise of that
right, given that there may be various tax treatments or various services, being
a matter for the customer cannot be pre-determined and since it could not be
known what the purchaser would do with his card to attempt to dissect the
transaction into unrealistic or at best speculative components would not reflect
reality and so would be an error".
The Court of Session agreed with the Tribunal’s decision, stating that “the
transaction … is properly characterised as the provision of a contractual right
to use the appellants’ facilities, for a fixed period, as described in the
application form, at the point of payment”. Therefore, where other councils or
leisure trusts are operating schemes similar to those made by The Highland
Council, these are to be treated as a single standard-rated supply.
However, HMRC accept that, where a scheme offers facilities or activities
that would all - if supplied individually - be exempt, the supply of the package
is also exempt. This is because the liability can be pre-determined at the time
Nor does the Court’s decision affect membership schemes. Thus there is no
impact on the extra-statutory concession for apportioning membership
subscriptions to sports clubs run by non-profit making bodies.
If you have been applying the incorrect VAT treatment, you will need to account
for any unpaid VAT as follows:
- where the total of previous errors does not exceed £2000 net tax, an
adjustment may be made to your current VAT return, or
- where the total of previous errors exceeds £2000 net tax, a separate
voluntary disclosure should be submitted to HMRC (in these cases the errors
must not be corrected through your VAT returns).
Full details are given in VAT Notice 700/45: How to correct VAT errors and
make adjustments or claims.
Further information can be obtained from HMRC’s National Advice Service.
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© Crown Copyright 2007.
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Article Published/Sorted/Amended on Scopulus 2007-07-13 12:29:11 in Tax Articles