Barking and Dagenham Council is set to receive an extra £260,000 per year in income following a change to its leisure contract. The cabinet approved the move to an 'Agency Model' arrangement with SLM Limited (Everyone Active) at a meeting on 19 August 2025.
The contract with SLM Limited commenced on 15 September 2024 and has a term of 10 years, with an optional extension of 5 years.
The decision follows a recent HMRC VAT ruling that designates leisure provision by local authorities as non-business. This means output VAT is not chargeable on services, and input VAT can be recovered on revenue and capital costs.
Cllr Dominic Twomey, Leader of the Council, explained that the legal and procurement teams were aware of the likelihood of this change during the original procurement. However, the official announcement came too late to be included in the new contract.
Under the new 'Agency Model', SLM will act as the council's agent in running leisure centres. The council will receive approximately two-thirds of the VAT benefit, with SLM retaining one-third. According to the Leisure Contract Report, this split is broadly in line with arrangements offered by other leisure providers.
The report states that SLM, our leisure provider, have put forward a two-thirds to one-third split in favour of the council, and all this has been agreed as it's broadly in line with what other leisure providers in other areas have offered.
The change will bring an extra £3.759 million to the council over the duration of the contract.
This additional income is welcomed, particularly in light of ongoing financial pressures. The Budget Strategy and MTFS Update 2026/27 - 2028/29 presented at the same meeting, outlined a forecast budget gap of £12.6 million for 2026/27, rising to £16.8 million in 2028/29.
The Leisure Contract Report also stated that there will be no operational change to the provision of leisure services within the Borough as a result of this change.
Appendices 1, 2 and 3 to the Leisure Contract Report, at pages 101 and 128, are confidential and restricted because they contain legal professional privileged information (relevant legislation: paragraph 5, Part 1, Schedule 12A of the Local Government Act 1972 (as amended)).
