Windfall comes after LVRPA wins tribunal case relating to its leisure facilities, reports Will Durrant, Local Democracy Reporter

Lee Valley Regional Park Authority (LVRPA) has been refunded almost £1.8million after wrongly being charged VAT on its sports centres.

After a tax case at the Upper Tribunal, LVRPA revealed it can add a windfall £1,792,298 to its day-to-day budget.

The refund from His Majesty’s Revenue and Customs (HMRC) relates to leisure services provided by LVRPA between April 2006 and March 2015, then April 2020 until March 2023.

It was revealed in a report for the authority’s executive committee, which is made up of councillors from across Essex, Hertfordshire and London, ahead of a meeting on Thursday, 19^th October.

In 1967, parliament set aside the Lee Valley for the “development, preservation and management [of] recreation, sport and leisure”. LVRPA was subsequently established to manage the area and today runs several high-profile venues, including the newly-reopened Lee Valley Ice Centre in Leyton, Lee Valley Velopark at Queen Elizabeth Olympic Park, and Lee Valley Leisure Complex in Edmonton. LVRPA’s head office is at Myddelton House Gardens in Enfield.

This week’s report suggests ways LVRPA could use its cash windfall. “The authority currently has £25m of external debt in relation to the development of the new ice centre,” it reads.

The report notes spending the money on this project would only represent a short-term gain, and that other opportunities to use the funds “will be lost”. It suggests the money would be better spent in the “operational budget” for 2024/25.

It adds: “It would be more prudent rather than to allocate the receipt to specific areas or schemes yet, that it is held, ringfenced within the general fund to allow officers and members to fully explore needs and priorities during the 2024/25 budget process.”

LVRPA is one of several local authorities which could get a VAT refund from HMRC as a result of recent change.

The nation’s tax authority originally suggested council leisure centres were business activities, not “public interest activities for the service of the community”. Some councils across the country denied this was the case – and three “lead case” authorities were chosen to challenge the HMRC. These were Mid Ulster District Council in Northern Ireland, Midlothian Council in Scotland, and Chelmsford City Council in Essex.

In 2010, council officers in Chelmsford tried to claim back £0.9m in VAT overpayments for leisure services between 2006 and 2010. HMRC rejected the claim, so Chelmsford took on the government department in the tribunals system.

After a twelve-year battle, Justice Joanna Smith and Judge Swami Raghavan ruled in Chelmsford’s favour in June last year. They looked at a European Union directive, which sets out local government groups should not be taxed if they act as “public authorities”, unless not charging VAT would distort the competition.

The Upper Tribunal decided council leisure centres do not exist solely for commercial gain. Instead, councils have “best value” obligations, a legal duty to promote healthy living, and a duty to look after the welfare of children.

The judgement, pointing to a local policy in Chelmsford, reads: “Perhaps the clearest example is the obligation under Section 17 of the Crime and Disorder Act 1998 which is directly reflected in the policy theme of ‘crime and disorder’, which explained how sport and recreation programmes could promote social inclusion and diversionary activities to help reduce crime and vandalism.

“No private operator would be obliged to run leisure facilities in this way, or to have regard to the various considerations to which we have referred.”

Having lost the case, a HMRC spokesperson said: “The courts have found that local authorities’ leisure services are provided under a statutory framework and can be treated as non-business for VAT purposes.

“HMRC has conducted a detailed analysis of the leisure services sector. We have found that allowing local authorities to treat their supplies of leisure services as non-business would not significantly affect competition.”

Councils can now claim back their leisure services VAT through HMRC.

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