Tribunal extends VAT exemption for cultural services

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In 2012 the British Film Institute (BFI) brought a case before the First-Tier Tribunal (Tax and Chancery) asserting that the VAT exemption for “cultural services” (which already applies to museums, art galleries and theatre performances) should also cover admissions to cinema screenings hosted by charitable bodies.

The BFI is a charity governed by Royal Charter and operates the BFI Southbank, the BFI Imax, the BFI National Archive and BFI Reuben Library.

The BFI’s claim successfully relied upon a direct reference to EU law and argued that the UK’s interpretation of the exemption was wrong and overly restrictive.

The legal definition of “cultural services” is unclear and the implications of the tribunal’s decision could potentially extend to other charities which show films, theatre or comedy. If so, these charities could also potentially argue that their admission charges should be VAT-exempt. This will doubtless require further interpretation by the courts.

HMRC may yet choose to appeal against the decision.

Cinemas and theatres operating as charities may wish to seek VAT advice from their accountants.

For more information please contact John Devine on 0191 211 7905.