URL: https://cmttpublic.cheshirewestandchester.gov.uk/ieDecisionDetails.aspx?ID=1933

Decision Maker:

Outcome: Recommendations Approved

Is Key Decision?: No

Is Callable In?: Yes

Purpose:

Content: Cabinet considered the report of the Director of Public Health concerning the adoption of an ‘Agency model’ between Brio (a wholly owned Council company which delivers leisure, health, and wellbeing services) and the Council for delivery of leisure and related services from April 2025.  Members noted that this was in response to changes made by HM Revenues & Customs (HMRC) in late 2023, to the value-added tax (VAT) rules relating to income from leisure services delivered by local authorities. In addition, the report also set out the outcomes of the holistic review of Brio, which was part of a wider review of the Council’s group of council-owned companies. It was noted this was in line with external best practice in relation to council company governance.   Members further noted Brio’s alignment to the council including delivery of the council’s integrated wellbeing service and borough plan priorities, as well as more broadly the direction of travel in relation to a transfer from a more traditional leisure centre offer to that of an offer more focused on active wellbeing.   Members’ attention was drawn to section 5 of the report which detailed the current position in relation to how VAT is treated for the supply of sport and leisure activities.  Members were informed that local authorities were previously treated as undertaking a business activity if they provided leisure services to members of the public.  Following challenges upheld in court, this status has now been changed and local authorities providing leisure services in-house can now treat this as a non-business activity, meaning these services will no longer incur VAT.   Councillor Carol Gahan, Cabinet Member for Finance and Legal, led the discussion on the item as proposer and the item was seconded by Councillor Adam Langan, Cabinet Member for Children and Young People.   Visiting Members:  Councillor Charles Hardy spoke in relation to the item.   Members welcomed the report and highlighted that the change to HMRC’s guidance notes allowed local councils to adopt this model, which a number of local councils had already adopted.  In response to points raised, Members were reassured at the due diligence undertaken throughout this process, they were confident that all risks had been assessed and that professional advice had been sought and received.  Members welcomed any assistance towards Brio’s operating costs in the current challenging economic environment.  In addition, Members also congratulated Brio on the social value it was delivering in extremely testing times which was in excess of £18m.   DECIDED:    That 1)            Brio be retained by the Council for the continued delivery of leisure, health, and wellbeing services via a service contract as per current arrangements to March 2030; 2)            Brio be appointed as agent of the Council for the collection of income from leisure and related services from 1 April 2025; and 3)            the Chief Operating Officer, in consultation with the Director of Public Health and Director of Finance, be delegated authority to implement the necessary legal agreements to establish the Agency model.   Reasons for Decision   1)            The last review of Brio took place during 2020 and led to the development of a new, shared vision for leisure, health, and wellbeing. In line with published external best practice in relation to council company governance which suggests a review takes place every 3-5 years, the latest review has recently been completed.   2)            Recent changes to VAT rules have confirmed that local authorities supplying sport and leisure activities do so under a special legal regime, which allows those activities to be treated as non-business. Following receipt of professional tax advice, an Agency model would allow the Council and Brio to take advantage of the new rules, whilst retaining existing benefits of Brio remaining a wholly owned Council company.   3)            The proposals outlined in this report support outcomes set out in the Council’s Borough Plan 2024-2028 under the Starting Well and Resilient People Living Their Best Lives categories.   Alternative Options   1)            The Council could choose to seek to deliver leisure, health, and wellbeing services in other ways. This could include bringing the services back in house under full council control or outsourcing to the external market. Neither of these options would enable the Council to realise both the benefits related to irrecoverable VAT or national non-domestic rates. Therefore, these options are not recommended.   2)            An Agency model would allow the Council and Brio to take advantage of the new rules, whilst retaining existing benefits of Brio remaining a wholly owned Council company.

Date of Decision: December 11, 2024