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HMRC to appeal over VAT on cinema tickets

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24th Nov 2005
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HM Revenue & Customs is taking its VAT case against Odeon subsidiary Bookit Ltd to the Court of Appeal.

As reported previously on AccountingWEB, Bookit Ltd takes remote credit and debit card bookings for Odeon cinema seats nationwide (but not cash bookings), and adds a handling fee to the ticket price. The High Court ruled in July that the handling fee added by Bookit was not subject to VAT, because Bookit was providing a financial intermediary service, and such services are exempt from VAT.

In its latest Business Brief, HMRC states: "It remains HMRC's view that the additional amount charged by Bookit to the cinema-goer is properly subject to VAT at the standard rate. The High Court did not consider the liability of Bookit's services as agent of Odeon for the sale of cinema tickets. Supplies of such ticket booking services therefore remain standard rated as supported by the tribunal's finding in Scottish Exhibition Centre (VTD 18994). The High Court found that services, such as the provision of technical or electronic assistance, or card handling services as an agent or a subcontractor to one of the parties to the transaction, did not fall within the exemption. Such services, therefore, remain standard-rated."

Until the Bookit case is settled, businesses making identical supplies to those of Bookit will not have to account for VAT on the fees. However, HMRC may issue assessments for the tax it believes is due to protect its position, and require payment of the assessed tax with interest if the appeal goes in their favour.

Similarly, businesses that have already accounted for and paid VAT on similar supplies can submit claims for overpaid tax to their local Business Advice Centre, subject to a three-year limitation period and to the 'unjust enrichment' provisions. HMRC will ask claimants to agree that their claims be held over until the Court of Appeal's decision. If they don't agree, then HMRC will make a protective assessment for any amounts repaid, and these will have to be paid back with interest if the High Court decision is overturned.

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