Efforts to tackle the growing obesity problem risk being seriously undermined by a move to claim VAT on public gym memberships held by nearly three million people.

While private gyms have to charge VAT on membership at 17.5 per cent, gyms run by leisure centres have enjoyed a partial exemption, allowing them to keep costs down.

In addition, most of the not-for-profit trusts that run hundreds of leisure centre gyms on behalf of local authorities have not been charging VAT at all.

But after a seemingly obscure court case in Scotland won by Revenue & Customs, tax officials have circulated a warning to all 2,597 public gyms saying that they must levy VAT on their full membership fees.

Experts say that the move will undermine Gordon Brown’s attempts to bring obesity under control, with higher fees likely to push thousands of members — and those most at risk of obesity — into giving up going to the gym altogether.

Average monthly fees at public gyms are £28.39, or £340 a year, according to the Leisure Database Company, compared with £42.07 at a private gym. Full VAT on top would increase the annual fee to £400.

Experian, a business consultancy, has analysed the backgrounds of the 2.8 million public gym members and forecast that at least 12 per cent, or 350,000 members, would give up their membership if the cost went up.

“If public leisure centre operators are forced to put up gym fees as a result of this initiative, they risk putting prices beyond the reach of the very target groups the Government is trying to get to do more exercise. It will seriously undermine attempts to get the nation more active,” said Patrick Gray, senior consultant at Experian. A regional breakdown of the data also indicated that charging full VAT on public gym membership would mean that in some areas, including Bristol and Southampton, they would be more expensive than private gyms.

Craig McAteer, chairman of the Sports and Recreation Trusts Association (SpoRTA), urged the Revenue to reconsider. The body represents 115 leisure trusts that run 550 leisure centres for local authorities.

“A significant number of our customers are in the lower socioeconomic groups,” he said. “If our public leisure centres are forced to apply VAT, considerably increasing the price, we could see a huge drop-off in visitors which will ultimately damage the Government’s vision of increasing participation and tackling rising obesity problems.”

The Revenue defended its actions, saying that it had not changed the rules but was simply reminding leisure centres of their VAT liabilities.

The case involved the Highlands council, which levied only a small amount of VAT on fees at leisure centres to cover non-sport facilities at the gym, such as the sauna and steam room. The court ruled that since membership was all-inclusive, VAT had to be charged on the full amount. After its victory, the Revenue dashed out a warning to all leisure centres and trusts.

“Quick as a flash after the court case Revenue & Customs made clear that the whole membership payment is subject to VAT and that trusts must also charge VAT if the subscription covers any activity that is not strictly speaking sport, which is of course most gyms these days,” said Steve Hodgetts, VAT partner at Baker Tilly, the accountant.

“It also made clear it would chase up VAT retrospectively if leisure centres had not been paying it. We calculate a bill of about £20 million.”

The Revenue said that it had not changed the guidelines and was only clarifying what should always have been the case.

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