Issue - meetings

That Cabinet:

a)      approve a change to the Leisure Management Agreement between Newark & Sherwood District Council and Active 4 Today such that the company becomes an ‘Agent’ of the Council in the delivery of Leisure Services; and

b)      delegated authority be given to the Deputy Chief Executive, Director of Resources and S151 Officer to vary the existing contract to an Agency Model arrangement and enter into all necessary agreements to implement the proposals.

The Senior Accountant presented a report which sought approval for moving to an agency model of delivery for leisure services by Active 4 Today Ltd (A4T). The current contractual arrangements with A4T reflected a long-established and widely adopted model for leisure outsourcing within local authorities which was considered the most VAT-efficient at the time.

Following consultation with our tax advisors and legal specialists it was being proposed to amend the existing Leisure Management Agreement between the Council and A4T. The proposed restructure would designate the Council as the ‘Principal’ in the agreement, with A4T acting as ‘Agent’ on its behalf. This change would mean that income generated by the leisure centres would be treated as income belonging to the Council and therefore included in the Council’s VAT returns. As a result, VAT that was previously irrecoverable (in the region of £236,000) could now be recovered going forward. The Council would, in turn, pay a management fee to A4T to cover the costs of operating the services.

AGREED (unanimously) that Cabinet:

a)       approve a change to the Leisure Management Agreement between Newark & Sherwood District Council and Active 4 Today such that the company becomes an ‘Agent’ of the Council in the delivery of Leisure Services; and

b)       delegated authority be given to the Deputy Chief Executive, Director of Resources and S151 Officer to vary the existing contract to an Agency Model arrangement and enter into all necessary agreements to implement the proposals.

Reasons for Decision:

This opportunity follows the successful litigation taken by Chelmsford City Council (and others) “the Chelmsford ruling”). The ruling confirmed as being non-business all supplies of local authority leisure services that were previously taxable (liable to VAT at the zero rate, reduced or standard rate) or VAT exempt are now non-business.

Options Considered:

That the Council would continue under the existing contract with Active 4 Today acting as Principal and therefore would continue to incur irrecoverable VAT.