Council to exercise more control over Hackney’s leisure centres

Swimmers at Britannia Leisure Centre. Photograph: Sean Pollock

Hackney Council is to take a more proactive role in managing the borough’s leisure centres, potentially saving the local authority hundreds of thousands each year.

Following changes made to VAT in 2023 by His Majesty’s Revenue & Customs (HMRC), the Town Hall has altered its contract with Greenwich Leisure Ltd, also known as Better Health, which runs fitness centres and other facilities across the borough.

While these have been operated by GLL since 2009, the council has now moved to take ownership of all income generated so it can benefit from the tax exemption.

Council documents state that taking more responsibility over these facilities would offer financial benefits to GLL “by way of reduced costs”.

But the Town Hall has not published any explicit projections on how much money the contract change will bring in.

When asked by the Citizen, Hackney Council declined to reveal how much it expects to save between now and 2030 as a result of the decision, as this information was deemed “commercially sensitive”.

Prior to the VAT policy changes in March 2023, local councils managing in-house leisure centres had to categorise services like gym memberships and other facility visits as ‘business activities’, and as such paid any VAT from income declared to HMRC.

These services are no longer classified as business, which means councils are not required to pay VAT on income – and can reclaim all the tax on any costs related to maintenance, equipment and renovations.

Since Hackney has outsourced the running of leisure centres for many years, in order to benefit from the VAT change it has had to find a new arrangement with GLL, known as the ‘agency’ model.

This enables the council to claim VAT by making itself the ‘principal’ that is responsible for leisure services, and GLL the ‘agent’ that manages their delivery.

Based on analysis from property lawyers Trowers and Hamlins, local authorities that use this ‘agency’ model could save between £50,000 and £100,000 per leisure facility each year as a result of VAT efficiencies.

However, according to the same firm, there remains a risk that HMRC does not accept a council’s ‘agent/principal’ arrangement.

But they also note that “with careful planning and advice, the [model] can provide significant VAT benefits for a local authority and the providers”.

GLL will now operate Britannia, Clissold, and Kings Hall leisure centres – plus four other fitness facilities in the borough – as an ‘agent’ of the local authority until the contract ends.

The council also agreed to extend the partnership contract by five years to 31 March 2034.