British Film Institute (‘BFI’): Admissions to all ‘cultural’ events can be VAT exempt
The Upper Tribunal (UT) in its decision of 12 August 2014 has decided that supplies of cinema admission made by the BFI between Jan 1990 and May 1996 fall within the exemption in Article 13A (1) (n) of the Sixth Directive (the ‘Cultural Exemption’). This article states that exemption applies to “certain cultural services and goods closely related thereto supplied by bodies governed by public law or by other cultural bodies recognised by the Member State concerned”
HM Revenue & Customs (‘HMRC’) had argued that the BFI was not exempt from VAT on supplies of right of admission as the Cultural Exemption did not cover cinemas run by publicly-governed bodies. In the judgment of the UT, the terms of Article 13A (1) (n) were sufficiently clear and precise for it to have direct effect and not to permit EU member states any latitude or discretion in its application. HMRC’s appeal was dismissed.
The UT’s decision confirms the view that the UK’s application of the Cultural Exemption has been excessively restrictive and it does not give the UK the discretion to limit the types of cultural services that can be exempted. Currently, the UK limits exemption to supplies by public or eligible bodies of rights of admission to a museum, gallery, art exhibition, zoo or a theatrical, musical or choreographic performance of a cultural nature.
Why is this important?
As a result of this decision, potentially any supply that falls under the heading of a “cultural service” should be eligible for exemption. A body that meets the conditions to be an eligible body under UK law, and which supplies any cultural services, (i.e. admissions to events and venues not currently covered by the UK law, and other non-admission services that are still cultural), could apply exemption to these and to closely linked goods.
At this point we await HMRC’s response to see if they are considering a further appeal or a change to UK law to reflect the EU law. To read the full decision please follow this linkhttp://www.tribunals.gov.uk/financeandtax/Documents/hmrc-v-bfi.pdf
Meanwhile suppliers should consider their position and might want to consider submission of claims for VAT previously overpaid.