Hackney (Parliament Politics Magazine) – Hackney Council is set to take control of the leisure centres, saving hundreds of thousands annually. The move marks a significant shift in management strategy.
The Town Hall has modified its agreement with Greenwich Leisure Ltd, also called Better Health, which operates fitness centers and other facilities throughout the borough, in response to changes made to VAT in 2023 by His Majesty’s Revenue & Customs (HMRC).
Although GLL has been running them since 2009, the council has now taken control of all revenue in order to take advantage of the tax exemption.
According to council papers, GLL would profit monetarily “by way of reduced costs” if it were given greater control over these facilities.
However, Town Hall has not released any clear estimates of the revenue generated by the contract modification.
In response to a question from the Citizen, Hackney Council said that it was “commercially sensitive” to disclose how much it anticipates saving as a result of the decision between now and 2030.
Local councils that ran in-house recreation centers had to classify services like gym memberships and other facility visits as “business activities” before the changes to the VAT policy in March 2023.
As a result, they had to pay any VAT on income that was reported to HMRC.
Since these activities are no longer regarded as business, councils are exempt from paying VAT on income and are able to deduct all taxes from expenses for upkeep, furnishings, and remodeling.
Hackney had to create a new agreement with GLL, known as the “agency” model, in order to take advantage of the VAT shift because it has long outsourced the management of its recreation centers.
By designating itself as the “principal” in charge of leisure services and GLL as the “agent” in charge of their delivery, the council is entitled to claim VAT.
Local governments that employ this “agency” model might save between £50,000 and £100,000 annually per leisure facility due to VAT efficiency, according to research by property lawyers Trowers and Hamlins.
However, the same firm asserts that there is still a chance that HMRC will reject a council’s “agent/principal” structure.
However, they also point out that “the [model] can provide significant VAT benefits for a local authority and the providers with careful planning and advice.”
As a “agent” of the local government, GLL will now run the Britannia, Clissold, and Kings Hall recreation centers as well as four other fitness centers in the borough until the conclusion of the contract.
Additionally, the council decided to prolong the collaboration agreement until March 31, 2034, by five years.
What are the challenges faced by Hackney in taking control of leisure centers?
Given Hackney Council’s severe financial difficulties, this strategy is a component of larger initiatives to cut expenses and boost revenue.
The council wants to improve health and wellness by better coordinating leisure services with community initiatives through a more proactive approach.
The present agreement with GLL expires in 2029, and negotiations are in progress to extend it by an additional five years, to 2034.
The Kings Hall Leisure Centre, which is scheduled to undergo renovations beginning in the fall of 2025, is one of the facilities that the council is also investing in.
Anticipated savings of £1,125,000 from the contract overall and £500,000 associated with the agency model are included in the 2025–2026 budget.