Nature of provision of sports and leisure facilities by a local authority

A dispute arose over the VAT treatment of sports and leisure facilities provided by Chelmsford City Council. HMRC said that Chelmsford was acting as a taxable person and therefore subject to VAT. Chelmsford claimed it as acting as a public authority under article 13(1) of the Principal VAT Directive 2006/112/EC so the services were provided under a ‘special legal regime’ that applied to a public authority - not to private operators.

The First-tier Tribunal agreed with the taxpayer so HMRC appealed.

The Upper Tribunal said that in providing the sports and leisure facilities Chelmsford was subject to legal obligations that did not apply to private sector operators because Chelmsford as a public authority was obliged to consider how such facilities could promote social inclusion and help to reduce crime and vandalism.

Further when making decisions about where to whom and at what cost...