VAT treatment of sports lettings in the education sector – do you have all the information to get it right?

VAT treatment of sports lettings in the education sector – do you have all the information to get it right?

If you are an independent school, an academy, or further education college, then you might let some of your sports facilities to third parties in the evenings, weekends or outside term time during the holidays.

Understanding the VAT treatment of these lettings is crucial to ensuring compliance with VAT legislation and avoiding unexpected tax liabilities.

The VAT treatment of sports facilities can be particularly complex as the VAT rate applicable can depend on a number of factors. However, we often find that a VAT liability has been determined and applied without consideration of all the necessary factors, including:

• the organisation making the supply – contractual agreements must be reviewed to establish whether the school, a trading subsidiary, or even a third-party agency/operator is making the supply of the sports facilities.

• the recipient of the supply – the status of the customer, such as whether it is a club, another education provider or a for-profit organisation all need to be considered to determine if VAT is applicable.

• The nature of the letting – is it a “sports facility” for VAT purposes or is it just a bare hall which happens to have sports markings.

• The length of time and frequency of the lettings, as well whether any buildings have been ‘opted to tax’.

Practical considerations

Education providers can take steps to ensure that they are applying VAT correctly to these sports lettings by ensuring they have all the information available to determine the VAT position. It is critical to have clear and explicit contractual agreements for the letting arrangements and then maintain clear documentation to support the VAT position applied should it be reviewed by HMRC.

We are increasingly seeing education providers fail to gain all the information necessary to consider the above factors and fail to apply the VAT rules correctly. Not only does this mean the incorrect amount of VAT is accounted for on income, but the VAT treatment of income also affects how much VAT is recoverable on expenditure, potentially leading to further errors.

What’s Next?

Education providers, for example, independent schools, academies, and further education colleges, should review their sports letting agreements to establish the correct VAT accounting and then check that this has been applied correctly to previous lettings.

At S3TAX, we specialise in providing tailored advice to the education sector. Contact our expert team today to discuss the VAT position of your sports lettings and gain clarity on your VAT obligations.