Universities and private schools could soon be paying business rates.

Leisure centres and educational institutions could face business rates

Council leisure centres, universities and private schools would be forced to pay business rates under reforms proposed in a major review.

Ken Barclay, the former RBS chief, accused local authorities of tax avoidance by delivering services such as gyms and cafes through arm’s length organisations (Aleos) that attract charity relief. He said exemptions for certain activities run by universities and independent schools are also unfair because they are unavailable to competitors.

One senior councillor in Courier Country warned making local authorities pay business rates on leisure services could cost them up to £5 million a year.

The Scottish Government commissioned the review in March last year and said they would “respond swiftly” to the recommendations.

In a 140-page report, Mr Barclay also called for nurseries to be exempt from the tax and the supplement that large businesses pay to be reduced to the English level.

Mr Barclay said: “Ratepayers providing the same goods or services should not be treated any differently because of their location, or by virtue of them operating in the public or private sector.

“We have also highlighted unfair advantages gained by anomalies within the system, and of those who deliberately avoid payment of tax.

“Neither is fair. These measures are essential for the rates system to remain credible for ratepayers and to ensure revenues are not undermined by avoidance tactics.”

In a swipe at councils, he said they had been deliberately avoiding tax by using arm’s length external organisations (Aleos) to run services.

Aleos are eligible for charity relief when directly-run services are not.

Mr Barclay said that is unfair on private operators and those local authorities that do not exploit Aleos as much as others.

“This allows councils to gain additional funding from the Scottish Government outwith the usual funding arrangements, a fact acknowledged by councils themselves as one of the primary reasons they put services into Aleo status in the first place,” he said.

“This is tax avoidance and should cease.”

Gail Macgregor, from council umbrella body Cosla, said they “absolutely refute any suggestions that councils have deliberately avoided paying rates”.

Fife Council co-leader David Ross said: “This is not about competition with businesses, it’s about service delivery and our initial estimate is it could cost the council between £4m-£5m a year.”