Caerphilly County Borough Council could be awarded around £1.3 million as part of a VAT repayment claim regarding sporting and leisure services.
The claim relates to VAT incorrectly charged by local authorities on supplies for sporting services, namely leisure centre and sports field bookings.
Her Majesty’s Revenue and Customs (HMRC) had prevented local authorities in the UK from an exemption on output tax on leisure services – something only available to non-profits.
In 2013, London Borough of Ealing argued that the services it was supplying should be exempt from VAT, a claim rejected by HMRC.
But the case was escalated to the Court of Justice of the European, which ruled in favour of the council last year.
In 2016, Caerphilly Council submitted its own claim to HMRC for overdeclared VAT dating back more than four years.
A report says the estimated repayment for the period May 2012 to September 2018 is £1.3 million, with the final figure yet to be confirmed.
The council say the one-off sum will be set aside in a capital earmarked reserve for leisure services, if their application is approved by HMRC.
The annual VAT that will no longer need to be paid to HMRC – around £264,000 per year – will be used to plug existing shortfalls against income budgets for leisure centres and sports fields.
But the report says a small number of sports clubs which reclaim VAT paid with bookings will no longer be able to do so if the exemption is applied to the council.
Some clubs already have a VAT exemption through block bookings, but the council would increase these charges to “ensure consistency for all customers”.
Any issues arising from these changes would be dealt with Mark Williams, interim director of communities, and Councillor Nigel George, cabinet member for community and leisure service.
Cabinet members are likely to progress the claim by approving the application when they meet on September 19.
Report by LDRS.