Decision

Opt to tax the Garlinge Recreation ground subject to the Home Advantage Programme Project with effect from 22/07/26 as part of the decision to deliver the football improvement project on the site.

Decision made in agreement with TDC Surveyor, as we are unable to split out the Community Use Agreement and works obligation, we will need to follow the advice to Opt to Tax this property.

Reasons for the decision

This project and all related documents and proposals were fully reviewed by our tax consultants.

Scope and Executive Report Received:

Garlinge Pavilion and Recreation Grounds – Home Advantage Programme (HAP)

Thank you for asking PSTAX ("I" or "we") to provide VAT advice to Thanet District Council ("the Council) regarding the 25-year lease granted to Ramsgate Football Club (85) (“the Club”) and the Home Advantage Programme (HAP) funded works at Garlinge Pavilion and Recreation Ground.

Scope of the advice

The Council has asked us to review the peppercorn lease to determine whether the arrangements constitute a barter transaction and, if so, to assess the associated VAT treatment.

Executive Summary

1.  The Football Foundation’s Home Advantage Programme (HAP) requires the Garlinge site to be leased to Ramsgate FC at a peppercorn rent. However, the current draft lease demands monetary and non-monetary consideration in the form of insurance rent and services via the Community Use Agreement (CUA) and completion of the major structural HAP Works. 

2.  Because of these obligations, HMRC will view this not as a non-business peppercorn arrangement, but a VAT-exempt business activity

3.  If the Council proceeds with the lease as currently drafted, it creates a barter transaction requiring strict accounting.

•  The Council must invoice the Club for the total value of the lease, which is calculated as the insurance rental costs plus the estimated monetary value of the CUA services and the HAP works. 

•  In return, the Club must issue an invoice to the Council for the same amount for providing CUA and HAP services (building and pitch improvements).

4.  If the Club charges VAT on its invoice, the Council can only recover this VAT if its total exempt input tax remains "insignificant" (less than £7,500 per year or 5% of its total VAT incurred).

5.  To minimise irrecoverable VAT costs, the Council has two options:

Option 1: Create a genuine peppercorn arrangement. The Council must absorb the insurance costs, remove the CUA and HAP Works obligations from the lease, and manage them instead through separate agreements. This option is not possible under the funding requirements.

Option 2: The Council could choose to opt to tax the Garlinge site. The Council would retain the current lease conditions, including insurance, rental, and delivery arrangements, for CUA and HAP works. However, the lease would be subject to standard rate VAT rather than exempt VAT. As a result, the Council would no longer be subject to partial exemption restrictions on this site. Opting to tax would mean the Council must charge the Club VAT at the standard rate on the full lease consideration.

Background Information

Option To Tax is generally irrevocable for 20 years.

Once a property has been opted, then (apart from a brief "cooling off" period) it cannot normally be revoked for at least 20 years. However, it currently seems probable that LGR proposals will result in the creation of a new unitary authority, which will take on the activities of the Council, other neighbouring authorities and the relevant parts of the County. This new authority will likely have a new VAT registration number. In previous LGR exercises, HMRC have taken the view that options to tax made by the authorities which cease to exist under LGR will lapse, and it will be for the successor authority to decide whether or not it wishes to opt to tax specific sites.  Depending upon both the stage of the works and the successor authority's forecast of its partial exemption position, it might decide that it does not need to opt to tax.

Alternative options considered

Not to opt to tax, this has been rejected due to the implication on the Football Foundation funding requirements and need to ensure the improvements works are delivered under lease protections.