HMRC fought the claim in the courts, with multiple hearings and appeals being held, before the Upper Tribunal rejected HMRC’s latest challenge.

HMRC has now accepted the Upper Tribunal’s judgment and is working to agree the amounts to be repaid. The council expects that more than £2.5 million should be returned ,which the Council had paid in VAT between November 2007 and April 2015. The Council outsourced its leisure services in 2015 so the period after this date is not affected by the HMRC case.

Worthing’s medium term financial strategy - the Council’s plan for how it will manage its finances over the next five years will now be reviewed. A decision will then be made on how much of the funds being paid back by HMRC should go into reserves or if some should be invested in urgent projects.

The Council has been forced to dip into its reserves over the last 12 months because of the sudden rise in inflation, energy bills and the impact of the cost of living on the most vulnerable. The available reserves have fallen to just £683,000, meaning the Council could have struggled to fund urgent action if there was a sudden emergency or unexpected bill to pay.

Cllr John Turley, Worthing’s Cabinet Member for Resources, said: “This has been a long battle but the excellent work of our officers over the last 12 years has finally paid off.

“We need to put the lion's share of this refund from HMRC back into our reserves but we will also take a detailed look at our budgets to see if some should be invested for the benefit of the community now.”