VAT on Pre-Paid Income

I have been asked to assist with a query relating to the applicable VAT treatment for income received in advance which is due to be passed over to a third party.

The Council concerned sold memberships entitling users to access leisure facilities for periods of up to a year. These memberships were standard-rated for the purposes of VAT. Recently the Council has transferred responsibility for providing these services to a third party as part of an outsourcing arrangement. At the point of transfer there was an unused period of membership on the memberships sold by the Council prior to transfer. The new service provider is exempt for the purposes of VAT so does not charge VAT as part of the cost of new memberships sold. Is there any HMRC guidance setting out whether it would be reasonable for the Council to adjust future VAT claims by the VAT paid on the unexpired membership so that amounts paid over to the new provider for unexpired memberships can include the element which was originally VAT?

Thanks all