Font Size

HM Revenue and Customs Brief 6/17 - VAT - treatment of sports facilities by local councils


HM Revenue and Customs -Tax Authorities

Tax Articles
Submit Articles   Back to Articles

Published 29 December 2017

Purpose of this brief

This brief provides information on how HM Revenue and Customs (HMRC) 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.

Who should read this brief

Local authorities providing members of the public with sports facilities and their advisers.

Explanation of change

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. This means that related VAT on inputs will be restricted where it isn’t treated as insignificant under paragraph 8.2 of VAT Notice 749: local authorities and similar bodies. The alternative is that they can continue to tax those supplies on the basis of UK law. This means that VAT on inputs will continue to be recoverable where it relates to taxable supplies.

HMRC expects councils to account for VAT on a consistent basis. This means that where councils have opted to make a claim for exemption in respect of past periods, they’ll be expected to continue to exempt supplies in subsequent periods. Claims won’t be accepted where councils have proceeded on an inconsistent basis.


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 claim direct effect and therefore to treat those supplies as exempt from VAT provided that they did so on a consistent basis. HMRC has accepted the decision.

This means that local authorities are entitled to recover any net over-declarations they have made as a result of having treated the supplies as taxable rather than exempt. The net over-declarations are calculated after deducting from the over-declared output tax any input tax wrongly claimed by prescribed accounting period (VAT return) on the assumption that the supplies in question were taxable and not exempt, unless that input tax is treated as insignificant read paragraph 8.2 of VAT Notice 749: local authorities and similar bodies.

Outstanding appeals to the First-tier VAT Tribunal

HMRC now intends to process outstanding claims made by local authorities making supplies of services closely related to sport where:

  • the local authorities concerned have asserted their right to direct effect of the sporting exemption on the basis of London Borough of Ealing (Case C 633/15) on a consistent basis
  • subject to satisfactory verification of the amounts claimed

This won’t include any amounts claimed on other grounds. Where that amount results in an interim net payment to the local authority, then that amount will be credited.

Unjust enrichment

HMRC reserves the right to refuse claims on the grounds of unjust enrichment where they’re able to show that the claimant passed the economic burden of the VAT charge on to their customers. The provisions are explained in sections 9 and 10 of VAT Notice 700/45: how to correct VAT errors and make adjustments or claims.

HMRC may examine the quantum of the claim, including the requirement to apply revised partial exemption and capital goods scheme calculations to ensure claims are accurate.

Making a claim

All claims must be made in writing, 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.

Only the person who accounted for the ‘VAT’ is entitled to make a claim to recover it.

All claimants must confirm that their claims:

  • are accurate
  • this applies only to supplies of services that are closely linked and essential to sport and on which VAT has been paid incorrectly
  • have been adjusted in accordance with VAT Information Sheet 08/17: claims for over payment made by local councils

Any other supplies or claims made on a different basis must be excluded from these arrangements.

All claims must be sent to:

New claims

All claims will be subject to the 4-year time limit in section 80(4) of the VAT Act 1994.

Return adjustments

Local authorities with over declarations of output tax within certain monetary limits may wish to correct any errors on their VAT returns under regulation 34 of the VAT Regulations 1995 rather than submit a formal claim under section 80 VATA 1994 to HMRC. However, in doing so they would not receive any interest. Further information on the monetary limits and which returns may be adjusted is available in VAT Notice 700/45: How to correct VAT errors and make adjustments and claims.


In circumstances where local authorities have not taken due care in submitting valid claims, they may be charged a penalty in relation to prescribed accounting periods starting on or after 1 April 2008, where the return due date is 1 April 2009 or later. They may therefore incur a penalty if, as a result of a failure to take reasonable care, their VAT return shows either too little tax due or a repayment that is too large.

About the Author

© Crown Copyright 2017.

A licence is needed to reproduce this article and has been republished for educational / informational purposes only. Article reproduced by permission of HM Revenue & Customs.

Follow us @Scopulus_News

Article Published/Sorted/Amended on Scopulus 2017-12-30 00:00:00 in Tax Articles

All Articles

Copyright © 2004-2021 Scopulus Limited. All rights reserved.