VAT changes to the construction industry have added nearly £315,000 to the costs of a flagship project to refurbish a North Dorset leisure centre.

Trustees of the Gillingham Community and Leisure Trust, who have masterminded a £6million refurbishment of Gillingham’s leisure centre, are facing a VAT bill of some £314,000.

Cabinet bosses at North Dorset District Council, recently voted for an interest free loan to be repaid over 25 years, to help volunteers over the VAT hurdle.

Council leader, Peter Webb, said the importance of the facilities to people in the district had prompted councillors to back the “soft” loan.

“When a council undertakes a loan like that it has to bear in mind that the circumstances may prevent it being repaid according to the scheme to the schedule,” said Cllr Webb.

Council officers had hoped to recover VAT spent on the builders’ fees, as they had done with the construction of The Exchange arts centre in Sturminster Newton.

But a High Court ruling brought by HM Revenues and Customs closed the loophole earlier this year.

A report to the cabinet warned that VAT was “likely” to rise to 20 per cent after the next general election, leaving leisure centre trustees facing a £314,000 bill.