Leisure centre and swimming pool finance for operators, trusts and swim schools

Often only in part, so the finance may need to cover VAT as well as the works. A non profit trust that qualifies as an eligible body supplies its sports and fitness services exempt from VAT, and VAT on costs used for exempt supplies cannot normally be reclaimed. Where the works also serve taxable income, such as a café, vending or retail sales, part of the VAT can be recovered under partial exemption rules, which the trust's VAT adviser calculates. A commercial operator charges standard rate VAT on memberships and can usually reclaim VAT on the works, so the same refurbishment costs it less to fund. Lenders ask for the project cost including any VAT that will not be recovered, the adviser's view and how the cash flow carries closed areas during the works. We arrange refurbishment and equipment finance for leisure trusts and operators and size the request on the true cost.

Are leisure centre memberships exempt from VAT?

It depends who runs the centre. Sports and fitness services, including gym and swimming memberships for people taking part, are exempt when supplied by an eligible body, meaning a non profit organisation that limits the distribution of profits, puts surpluses back into its facilities or purposes and is not under commercial influence. The same memberships sold by a commercial operator are standard rated. Social memberships without sports use are standard rated whoever sells them, and an all inclusive package bought mainly for a sauna or spa can be standard rated too. Since HMRC's Revenue and Customs Brief 3 (2023), councils can treat leisure services they run in house as non business, so no VAT is charged on them.

• Recoverable VAT. The share of VAT on the works the trust can reclaim, confirmed by its adviser.
• Income mix. Exempt sports income set against taxable café, retail and vending sales.
• Eligible body status. Governing documents showing the non profit and non distribution terms.
• Closure period. Income lost while areas are shut, which the cash flow has to carry.

GOV.UK sets out sport supplies that are VAT exempt and the change for council run leisure services. Our refurbishment finance page covers funding building works, and VAT loans looks at paying a large VAT liability over months. Instant Quotes gives a leisure operator a first view of suitable panel lenders.

Yes, if the transfer comes with a lease long enough to borrow against and a business plan showing the centre can pay its way. When a council hands a pool or sports centre to a community organisation or trust, the group takes on running costs, staff and repairs the council used to carry, often in a building that needs work. Lenders and social investors look at the lease length and terms, who repairs the structure and plant, any transition grant or management fee from the council, a condition survey with costed repairs, the membership and programme forecast and the experience of the board and centre manager. Groups often combine grants, community shares and repayable finance, and lenders expect any loan to be repaid well within the lease. We arrange finance for community and trust operators and present the lease and plan the way lenders read them.

Can a council transfer a leisure centre for less than market value?

Yes, within limits. In England, councils must normally dispose of land for the best price reasonably obtainable, but the General Disposal Consent (England) 2003 lets them sell, or grant a lease of more than seven years, at an undervalue of up to £2 million without applying to the Secretary of State, provided the council considers the transfer will promote or improve the economic, social or environmental well-being of its area. A bigger undervalue needs specific consent. A long lease at a low or peppercorn rent is a common route for community asset transfers, and its repairing terms matter to a lender as much as the rent.

• Lease. Length, rent, break clauses and who repairs the structure, roof and pool plant.
• Condition survey. Costed repairs over the next ten years, so the plan carries them.
• Council support. Any transition grant, management fee or tapering subsidy, confirmed in writing.
• Governance. The legal form, board experience and power to borrow in the governing documents.

GOV.UK publishes the circular on disposals for less than best consideration. Our social enterprise finance page covers borrowing by community organisations, and working capital loans covers the first months of running costs. Instant Quotes helps a community operator see which panel lenders to approach.

A leisure centre usually earns from several streams. Memberships, often by monthly direct debit, cover the gym, classes and swimming. Pay-and-play swims, lane hire for clubs, school swimming lessons and a learn-to-swim programme fill the pool timetable. Sports halls, courts, parties, a café and vending add more. Swim schools earn mainly from termly or monthly lesson fees, which gives them predictable income if their waiting lists hold up.

The costs are heavy and hard to cut. A pool has to be heated, the water treated and the air handled whether ten people swim or two hundred. Energy, chemicals, lifeguards and qualified pool plant operators run all year. Pool plant, filters, pumps, boilers and air handling units wear out on a cycle, and tiling, changing rooms and roofs need major work every so often.

• Replacing pool plant: filters, pumps, dosing and UV systems, and controls
• Cutting energy costs with heat pumps, solar panels, pool covers, LED lighting or heat recovery on air handling
• Refurbishing changing rooms, poolside areas, tiling or a pool tank (see refurbishing a leisure centre pool)
• Refitting the gym floor or adding studios to grow membership income
• Adding a teaching pool, splash area, sauna or spa
• Fitting out a unit as a dedicated swim school pool
• Taking on a centre from a council or another operator, or buying a freehold
• Bridging the gap between a grant award and its payment, or covering a quiet spell

Many public leisure centres are owned by a council and run by a leisure trust or a contractor under a management agreement. Others have been transferred to community groups. Some trusts are charities or community benefit societies, and some community pools are registered as a community amateur sports club; see HMRC's CASC guidance for the rules those clubs follow. A charity or society usually needs its governing documents to permit borrowing and its board to approve it, and our social enterprise finance page covers how lenders view these structures.

Where an operator does not own the building, lenders look closely at the length of the lease or management contract. A loan that runs beyond the contract, or a refurbishment of a building the operator might hand back, is harder to fund. Independent operators and swim schools trading as limited companies borrow like any other business.

Not-for-profit operators can also look at grants. Sport England and the other national sports councils run funding programmes for community facilities. Sport England's Swimming Pool Support Fund for public pools in England was open only to local authorities and has now closed.

Pools rarely make money on swimming alone, so test repayments against a cautious membership forecast and a realistic energy price. Energy savings projections are estimates; borrow on terms you could meet even if savings are lower. Finance for building works in a leased or council-owned building should end well before the lease or contract does. Directors of limited companies should expect personal guarantees; see our guide to personal guarantees. Borrowing of £25,000 or less by sole traders and small partnerships can be regulated consumer credit, which brings additional protections.

This page covers finance for businesses and organisations that run pools for members or the public. Finance for building or renovating a swimming pool at a private home is personal borrowing and outside its scope. Hotels with pools may also find hotel finance useful, and holiday parks should see caravan park and campsite finance. Indoor attractions such as climbing walls and bowling are covered in indoor leisure finance, and members' sports clubs in sports club finance.