Treasury loses out to charity in landmark VAT case

The heavyweights of the Treasury have been floored by rural minnows after
Appeal Court judges took a milestone decision to protect an opera company’s tax

Gloucestershire-based Longborough Festival Opera won its appeal to retain VAT
immunity on ticket sales, and it is believed the ruling will have important
ramifications for hundreds of other arts charities that are dependent on similar
tax breaks to survive.

Judges ruled that HMRC wrongly stripped the opera company of its ‘cultural
purposes exemption’ after it accused Martin Graham, its founding trustee, of
having a financial interest in the company because he had offered to underwrite
losses in a production of Wagner’s 16-hour epic Ring Cycle.

He told The Times: ‘Just about every major arts organisation is a
charity, which means that we get all sorts of tax breaks. I suspect HMRC had a
sinister motive in chasing such a tiny company on such spurious grounds. Had
they been successful in destroying LFO they would have moved against many other
much larger arts organisations.’

Graham marked the win by assembling outside the High Court with members of
the company dressed as Valkyries and also carrying the fake corpse of a VAT man.
The case had hundreds of other cultural organisations on tenterhooks, as they
believed that they could also be in line for VAT bills.

To be eligible for tax breaks a cultural organisation must be run on an
essentially voluntary basis by people who have no financial interest in it.

Yesterday, Bournemouth Symphony Orchestra did not enjoy the same fortunes as
it lost its appeal after being stripped of its cultural exemption from charging
VAT on ticket sales. The BSO lost its case because judges ruled Michael Henson,
a paid employee, also sat on the board of trustees, which is ‘constitutionally
responsible’ for running the orchestra.

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