THEATRES - VAT ON ROOM HIRE

Multiple or single supplies

Room hire on its own is normally exempt from VAT, doesn't matter what sort of building the rooms in. But this isn't room hire on its own by the sound of it, and if the room hire is just an element of an overall suppy then the liability will depend on the nature of that larger supply.

What needs to be looked at is whether what you're getting is the right to use a room, and then as separate supplies you also receive use of a technician, front of house etc., or whether you are receiving as a single supply of the elements necessary for you to put on a production. How you get invoiced for this is not a deciding factor, so even though they split out venue hire, staff, electricity etc on the invoice is doesn't mean that they can charge them as exempt, standard rate, and reduced rate respectively. If you went to Primark, or Harrods, and bought a T-Shirt they could give you an invoice that split the cost into materials, labour costs, shipping costs etc, but this wouldn't change the fact that you'd only bought a T-Shirt.

Issues of single and multiple supplies can be quite thorny issues, but the courts tend to look at what the overall aim is for the purchaser, and the economic realities of splitting supplies, so if a wedding party hires a room for a reception with catering and bar they will say they've bought a 'wedding reception' rather than splitting the elements out. Likewise here if you've paid for everything to put on a production then I suspect that it would be seen as a single supply and taxable.

If the theatre does in fact however rent out rooms without the extras and you could also have provided your own staff to run everything, or the theatre is able to provide staff to productions in other venues then there may be scope for splitting it into separate supplies if that is the relaity of their trading.

But as I say my first reaction would be that the whole supply is likely to be taxable based on the formulation of your question, but it does depend on the full facts and the actual set up of the theatre and how touring plays are put on as there are a number of models for this that have differening VAT treatements.

@Spidersong

Can I ask you a question out of interest on this if I may?

I was unsure whether room hire in a theatre (on its own) would be exempt.  Does item 1(l) in Group 1 of Schedule 9 then only apply to "viewing" accommodation in a theatre?  I'm referring, of course, to the meaning of the words "or other accommodation".

Ernest

Yes that's how I'd interpret it, I'd view the phrase 'place of entertainment' as a qualifier for the section i.e. it's there to make sure that you don't exempt admission to an entertainment event through a sort of legal backdoor. So whilst there's no entertainment on then the provison of a room doesn't fall within the note.

I think it's there to put beyond doubt that a supply of 'accomodation' whilst being entertained is subsiduary to the actual entertainment, it seems to be the case that for once legislators were thinking far enough ahead that they didn't restrict it to the common examples that they could think of (Box and Seat). So the legislation managed to capture private parties at cinemas where you hire the entire screen etc, but I would say that renting rehersal spaces, or hiring an entire theatre goes beyond that exception to the exemption.

The observations in the '97 case of 'Southend United Football Club' (VTD15109) also support this view, with the tribunal looking at whether the use of corporate boxes fell within 1(l) since they were available both whilst football was being played and outside of the time. They only appear to have dismissed the case because the boxes were almost exclusively used whilst matches were on, so they didn't take the view that the mere provision of the facility within a sports ground was standard rate but that what you needed to look at was the provision of the facility concurrent with a provision of entertainment. In essence the club was wrong to weight their calculations on a time basis as they had 'ignored the issue of value' with the value of the boxes being purely in relation to the football being played [depending on your view of the value of Southends footballing ability!?!]

Thank you

Yes. I'd wondered about the "place of entertainment" qualifier, but didn't then understand why the words "or other accommodation" had been chosen over "or similar accommodation".  Your example of hiring the whole cinema would fall out if that wording had been chosen though, so it does make more sense now.

Thanks again.  Sadly I've no idea about Southend's ability, but it's nice to have a reference.  HMRC's Land and Property manual seems to deal with all of the other exceptions apart from this one.