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Cultural exemption - certain services or all services

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22nd August 2014

The Upper Tier Tribunal has just released its decision in the case of the British Film Institute (“BFI”). This decision is a significant one for certain organisations that provide cultural services but are presently obliged to charge VAT on admission prices/ticket prices etc. It is also useful in further clarifying the scope for exemption applying to sporting services and indicates how future decisions which might turn on the phrase “certain services” used in EC and UK legislation are likely to progress.

The BFI is a not for profit organisation that has Royal Charter requiring it to act in the public interest. It had lodged a claim for VAT of £1.2m in 2009 on ticket sales to films shown at its theatre and film festivals on the basis that it had accounted for VAT on supplies that were properly exempt as all cultural services were exempted from VAT under the Sixth VAT Directive 77/388/EEC (‘Sixth VAT Directive’), art. 13(A)(1). The films screened were ‘art house’ rather than main stream mass entertainment films.

HMRC rejected the claim on the basis that UK law only specified certain cultural events and activities that benefitted from the VAT exemption. The argument of HMRC was essentially based on the premise that the EC legislation was conditional as it refers to “certain” cultural services rather than “all” cultural services. The case therefore turned on if “certain” is synonymous with “all” in the confines of the cultural VAT exemption.

The First Tier Tribunal (Tax) decided that there was no reason why film tickets of the type sold by BFI should not be included within the cultural exemption. EC case law in the instance of the sporting exemption had found that the exemption for “certain” sporting services applied to “all” sporting services provided by the types of bodies referred to in the exemption. This decision was made on the basis that the government had no scope to pick and choose the type of cultural activity what was or was not within the exemption. It also made the point that the word cultural is not unclear, whereas HMRC tried to argue that it created an ambiguity.

The Upper Tier Tribunal has confirmed the decision of the First Tier and again based this decision on existing EC case law particularly the cases of EC Commission v Spain, Hoffmann and Canterbury Hockey Club v R & C Commrs as these cases make it clear that a member state has no discretion to choose the type of activity that is within the exemption and the type of activity that is outside.

If your organisation or your client is a non-profit making body providing cultural services (or sporting ones for that matter) and is accounting for VAT on the income from such services it would be worth giving our free helpline a call to see if there is any opportunity to make a back claim for VAT. It should not be forgotten that any increase in VAT exempt income will have a knock on effect on VAT recovery on related costs, if this has not already been considered we firmly recommend that you call our helpline to discuss this point.


About the Author

The VAT People are leading VAT and Customs Duty consultants based in the North West of England. We work with a wide range of businesses throughout the UK as well as assisting our accountancy colleagues to unravel the thorny VAT issues for their clients. We are one of the UK's largest and most comprehensive sources of VAT and Customs advice, our consultancy team having over 140 years of experience in VAT and Customs gained in either HMRC or a Big 4 accountancy practice environment.

Call us on our VAT helpline 0800 077 4604 to discuss. All initial discussions are free with no-obligation.



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Article Published/Sorted/Amended on Scopulus 2014-09-04 08:54:33 in Tax Articles

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