Council eyes major VAT savings with leisure centre change

A report going to the Community Safety, Leisure and Sport Decision Meeting on 22 April 2025 recommends that current operator BH Live changes role from main contractor to acting as an agent for the council.

The change comes after a recent shift in how VAT rules apply to local councils providing sport and leisure services. These rules now allow councils to recover VAT on costs if they provide the services themselves or through an agency model.

The report explains: “The most VAT efficient operating model is for local authorities themselves to provide leisure services rather than 3rd party organisations, even if they are non-profit making ones.”

BH Live, a charity and social enterprise, has run the city’s leisure centres since 2017. The centres include the Mountbatten Centre, the Pyramids Centre, and others across Portsmouth. Under the new model, BH Live will continue running the centres, but as an agent, meaning the council can now claim back VAT on spending while still using BH Live’s experience and staff.

The contract with BH Live runs until March 2027, and switching to the agency model could save the council around £700,000 in VAT over the next two years, based on estimated annual savings of £350,000.

“This would allow the council to obtain the VAT benefits with immediate effect, without having to wait until the end of the contract,” the report states.

Legal advice confirms the change is allowed and follows a growing trend across the country, with more than 100 councils considering similar arrangements. The agreement is set to be backdated to 1 April 2025 if approved.

The report also notes that this option avoids any disruption to customers and allows the council to keep using BH Live’s expertise, while benefiting from the financial savings. Other options considered—such as ending the contract early or waiting until 2027—were rejected due to legal risks and lost savings.

The cabinet member for community safety, leisure and sport, Councillor Lee Hunt, will make the final decision at the meeting on April 22.