VAT on live screenings: ‘It would be nice to have clarity’
Many people have gone along to their local arts venue to see Phoebe Waller-Bridge starring in Fleabag, Bill Nighy in Skylight or the latest production from the Royal Opera House or the Royal Ballet.
But were those audiences seeing a live production or a film show?
As previously reported by AccountingWEB, a tribunal had to decide whether such productions qualify as live cultural attractions which are exempt from VAT. VAT expert Hilary Bevan has told iplicit that the case leaves issue “in limbo” and “it would be nice to have some certainty”.
Drama at the tribunal
Derby Quad Limited had appealed to the First Tier Tribunal (Tax Chamber) over HMRC’s insistence that live screenings did not qualify for exemption from 20% VAT.
Derby Quad shows live broadcasts of cultural events as well as recorded, “encore” screenings. It cited the “cultural exemption” that applies to “the supply by an eligible body of a right of admission to a theatrical, musical or choreographic performance of a theatrical nature”.
Such screenings are not like film showings, which are subject to VAT, the venue argued. Instead, “the event seeks to create the cultural experience of theatre through digital innovation”.
The tribunal roundly dismissed the idea that the exemption should apply to “encore” screenings.
As for live broadcasts, it was “not persuaded” that they were the same as films but did not consider that they qualified as live shows either.
The lack of a two-way interaction between audience and players was a “crucial distinction”.
“The tribunal considered that these interactions which require the audience and the performers to be in the actual same place was critical to a ‘theatrical performance’,” the decision said.
The implications for arts venues
VAT Consultant Hilary Bevan points out that the decision of a First Tier Tribunal is not binding in other cases and can be appealed.
“We don’t know whether Derby Quad will appeal or if HMRC will issue a brief saying they haven’t appealed. Until one of those things happens, we’re in limbo,” she says.
“I have a client that puts on National Theatre Live events. They had an email from HMRC in 2018 about cultural exemption, saying ‘We don’t know the answer but we’re happy for you to treat it as exempt for now – but keep Googling for updates!’
“It would be nice to have some certainty because, as you can see from reading through the case, it’s not black and white. There are lots of arguments that something like National Theatre Live is very similar to the theatre,” she says.
“You pay more than you would for a normal cinema ticket. People applaud at the end. Isn’t this just a more modern way of making theatre more accessible? My background is as an accountant, not as a lawyer, but to my mind it doesn’t seem very different from watching it live.”
The implication of the Derby decision is that many cultural venues are putting on a mix of VAT-exempt and VAT-able events.
“Nobody’s trying to put one over on HMRC,” says Hilary Bevan. “They want to get it right – and if they get it wrong, it’s because it’s complicated.”
If organisations’ assumptions about their VAT liability are overturned by the case, the quality of their records might present them with a problem.
“It could all depend on how your ticket sales end up in your accounting software,” says Hilary.
“Does it specify what type of show the sales relate to, or do you just have a total for ticket sales?
“It could be that there’s some digging to be done.”
Find out more about how iplicit simplifies the work of finance teams, including the thorny question of partial VAT.
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