Council challenge payment of VAT on encouraging healthy lifestyles
The Highland Council is joining a growing campaign to persuade the UK Government to reverse a decision by Her Majesty’s Revenue and Customs to seek payment of Valued Added Tax for schemes, such as the Council’s High Life Leisure Scheme, which promote active and healthy lifestyles at affordable prices.
Convener Councillor Sandy Park, has written to the Prime Minister and the Chancellor of the Exchequer to express the Council’s concern at the extra burden to be met annually in paying VAT on the issue of leisure cards and a bill for three years back-dated VAT.
At the same time, Councillor Park has written to Nicola Sturgeon, Cabinet Secretary for Health and Wellbeing in the Scottish Government, asking her to consider taking this matter up with the UK Government.
In his letter, the Convener said the High Life Leisure Scheme was introduced to encourage people to take up healthy leisure activities. Within two years, usage across all the centres was up by 47%.
He explained: “Rather than charging for each separate activity, the Council charge an all inclusive monthly sum. The number of times customers undertake both standard-rated recreational activities and zero-rated educational activities are counted to calculate the proportion of VAT due from the fees received in order to ensure that the right proportion of VAT due is paid.
“Initially, HMRC was content with this approach. However, they later took a different view, indicating that in having an all inclusive payment meant that customers were now paying simply for a right of access to facilities, rather than effectively prepaying for activities. Consequently, it decided that VAT was due on 100% of all income from the monthly payment.
“The effect of this change of view is that we now have to pay per year about £50 -60,000 more in VAT together with a three years back claim of an estimated £140,000. The Council challenged HMRC’s opinion firstly at a VAT and Duties tribunal and then at the Court of Session, but were unsuccessful.
“The Council is particularly concerned that the result of this ruling is that one arm of Government which can provide a significant local improvement in active lifestyles and is delivering on a major national government policy is being penalised by another arm of Government for innovative thinking.
“The Council is currently looking at how to minimise the effect of this ruling on our customers, as the last thing we want to do is to increase the cost of the scheme. My purpose of writing to you is to ask you to consider changing the Treasury’s policy and review these regulations, so that the educational component remains zero rated.
“If the regulations are not amended, then we may find that we are penalising those families who, without this scheme, would have no access to such healthy activities.”
Councillor Pauline Munro for Inverness West and member of the Board of Trustees for Inverness Leisure raised the matter at the Council’s Education Culture and Sport Committee. She said: “Although this iniquitous situation of taxing people on their healthy lifestyles started in Highland when The Highland Council lost its appeal at the Court of Session, this is now a Scotland-wide campaign. At a meeting held in Inverness this week of SPORTA (Sports and Recreation Trusts Association) it was agreed that all the trusts affected would lobby for the retrospective Bill to be dropped. This move by The Highland Council is part of this Scotland-wide approach and I am delighted that the Council is playing its part in bringing this issue to the forefront of the political agenda both at Westminster and Holyrood. This goes against our programme of Administration’s healthy living agenda and the Scottish and UK Government policy.”
For further information please contact: Iain Murray, Head of Community Learning & Leisure The Highland Council Education, Culture and Sport Service tel: (01463) 702048