Agenda item

Hinckley Squash & Rackets Club

Advice from PricewaterhouseCoopers LLP has been provided in two emails as follows:

 

From: janet.morritt@uk.pwc.com [mailto:janet.morritt@uk.pwc.com]
Sent: 15 May 2014 18:20
To: Sanjiv Kohli
Cc: Katherine Plummer; adam.timmins@uk.pwc.com
Subject: RE: Squash Club

 

Sanjiv,

If the Council will not have an interest in the land on which the new facility will be built, although the Council can reclaim VAT on the construction of the new facility, it will be seen to be making an onward standard rated supply of construction services to the Squash Club.  As such, the Council will need to declare VAT on the value of the construction works, i.e. £800,000.  This should put the Council into a "nil net" VAT position as it will reclaim £160,000 of VAT on the construction of the facility but will also need to "pay" £160,000 of VAT to HMRC on the onward supply of the construction services to the Squash Club.

If the Council has a freehold or leasehold interest in the land at Tungsten Park (e.g. the Council buys the land or takes a lease in the land from the Squash Club), constructs the new facility then grants a lease in the new facility to the Squash Club, the Council will reclaim VAT on the construction of the new facility but no VAT will be due on the lease to the Squash Club as the lease will be exempt from VAT.  In this case, the Council will reclaim VAT of £160,000 on the construction works but will not be required to "pay" any VAT to HMRC on the lease putting the Council in receipt of £160,000 of VAT from HMRC.  Although this VAT will be exempt input tax, based on our calculations, the Council should remain within its 5% limit under the seven year average (my email of 13 May 2014 refers).

We cannot say if the legal documents will need to be changed as we have not seen them.  However, the key issue for VAT is to ensure that all transactions are identified with the correct VAT liabilities being applied and any VAT due being brought to account as necessary.

I am happy to discuss the arrangements further with you; however, I will not be in the office now until Monday 19 May 2014.

Kind regards
Janet

Janet Morritt
PwC
Direct: +44 (0)121 232 2406
Email: janet.morritt@uk.pwc.com
PricewaterhouseCoopers LLP
Cornwall Court, 19 Cornwall Street, Birmingham, B3 2DT
Secretary: Lynda Handley Direct: +44 (0)121 265 5165; Email: lynda.handley@uk.pwc.com

 

From: janet.morritt@uk.pwc.com [mailto:janet.morritt@uk.pwc.com]
Sent: 30 June 2014 17:12
To: Sanjiv Kohli
Cc: adam.timmins@uk.pwc.com; Katherine Plummer; david.s.phelps@uk.pwc.com
Subject: RE: Squash Club

 

Hello Sanjiv,

Following our earlier conversation, I can confirm the following:

  1. We are happy for you to table the advice in our emails of 13 and 15 My 2014 to the Council meeting tomorrow as the advice was provided for use by the Council.  The original emails have a PwC header so can be treated as formal advice from us to the Council.
  1. We are happy to act on the Council’s behalf (subject to authorisation from Alison Breadon) in seeking clearance on the Squash Club transaction from HMRC.  Alison has approved the previous advice so I don't anticipate any problems in obtaining further clearance as long as our proposed fees remain within the fee cap for advisory work undertaken outside of our audit role but I will let you know if this is an issue.  As discussed, it is difficult to say how long it will take to obtain HMRC clearance particularly if the Council does not have an allocated officer at HMRC.  However, I would hope that we can obtain the necessary clearance within a month of writing to HMRC.  Our fees for seeking HMRC clearance will be between £2,000 and £5,000 plus VAT.


I hope this is useful and look forward to hearing the outcome of the Council meeting before we draft the clearance letter to HMRC.

Kind regards
Janet

Janet Morritt
PwC
Direct: +44 (0)121 232 2406
Email: janet.morritt@uk.pwc.com
PricewaterhouseCoopers LLP
Cornwall Court, 19 Cornwall Street, Birmingham, B3 2DT
Secretary: Lynda Handley Direct: +44 (0)121 265 5165; Email: lynda.handley@uk.pwc.com

Minutes:

Council was informed of the position regarding Hinckley Squash and Rackets Club and the proposal to facilitate the delivery of the new Squash Club. In response to concerns from some members, it was confirmed that the viability of the club had been assured, the courts would be available for booking by the public, and independent advice had been sought on the proposal.

 

It was moved by Councillor Lynch, seconded by Councillor Bray, and

 

RESOLVED –

 

(i)         the positive progress made in securing the opportunity of a new site and premises for Hinckley Squash and Rackets Club be endorsed;

 

(ii)        the procurement arrangements set out in the report to facilitate the delivery of the new Squash Club be approved and the legal agreements required be highlighted;

 

(iii)       in accordance with paragraph 1.4 of the Contract Procedure Rules, the waiving of the application of all of the Contract Procedure Rules to the contract and any sub-contract or other agreement to be entered into in relation to the proposals contained within the report;

 

(iv)       the following supplementary budgets be approved:

 

(a)        a capital budget of £998,338 + VAT + £2,380 SDLT for the capital costs of the work;

 

(b)        an income budget of £1,026,104 to represent the funding to be received for the capital works;

 

(c)        re-designation of the current expenditure budget of £49,000 which was to be awarded to the Squash Club but is no longer required, be set aside to meet any potential SDLT liability arising on the Squash Club.

 

(v)        the saving of £51,885 after legal and VAT advice costs be noted;

 

(vi)       the retention of the £51,885 saving in a reserve ring-fenced to meet any SDLT liability that may be incurred by the Hinckley Squash and Rackets Club due to the grant of the long lease, be approved;

 

(vii)      authority be delegated to the Chief Executive in consultation with the Leader of the Council and Executive Member for Finance to approve the final legal agreements subject to the community use of the facility being secured within the documentation and the financial implications being within the budgeted cost set out in the report;

 

(viii)     the purchase of the freehold of the land at Tungsten Park be approved and, should the Squash Club wish for it, the granting of an option to purchase for a nominal sum to HSRC in the lease agreement at the end of the 125 year lease, be agreed.

Supporting documents: