Theatres win VAT reclaim court case

Theatres win VAT reclaim court case

Mayflower Theatre Trust defeats HMRC over VAT reclaim

Theatres will now be able to reclaim a proportion of VAT on the cost of
hosting a production, following a High Court judgment.

Mr Justice Hart ruled in favour of the Mayflower Theatre Trust, which had
argued that fees paid to production companies for the right to host productions
were not solely related to the VAT-exempt sale of a ticket, and that theatres
should therefore be able to recover a proportion of VAT on this expenditure.

Exemption for VAT on ticket income for performances staged at theatres was
introduced in 1996, and as a result, theatres were no longer able to claim back
VAT on related costs.

Deloitte indirect tax director Simon Baxter said theatres and cultural
organisations would be ‘delighted’ by the judgment.

‘The cost of hosting productions is one of the most significant items of
expenditure that any venue incurs, and relief from even a proportion of VAT is
extremely welcome.’

The proportion of VAT that can be claimed is calculated from a ratio of
taxable income to total income, and is generally about 20-25%, but is ‘not fixed
and will be different for all theatres’, said Baxter.

It is not yet known whether HMRC has leave to appeal.

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