The ruling, due to come into play in June 2004, says that charities and other non-profit organisations must treat income generated through theatrical, musical or choreographic performances as exempt from VAT.
According to accountants Clement Keys the ruling is most unwelcome as VAT associated with staging such productions plus the general costs of the institution itself may not be recoverable.
Steve Simmonds, director of VAT services at the firm said: ‘Organisations who rely on grants to enable them to present dramas, musicals and dance events may find themselves worse off.’
According to the firm, the changes could also effect museums, art galleries and zoos run by not-for-profit concerns, and all such organisations are advised to obtain professional advice before the ruling comes into force.
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