Blow to arts as orchestra loses VAT appeal

Published Tuesday 10 October 2006 at 16:30 by Nuala Calvi

Arts organisations have been dealt a blow by the taxman this week in a landmark case that will have implications for the VAT status of charities across the UK.

Bournemouth Symphony Orchestra lost a challenge in the Court of Appeal to a High Court ruling that it could not claim cultural exemption from the tax because its managing director sits on the company’s board.

Mr Justice Mann said this meant the company did not meet the criteria of being “essentially voluntary”.

Meanwhile, in a similar case, Longborough Festival Opera was victorious after a three-year campaign against the withdrawal of its VAT exemption. It had previously been told that a trustee’s offer to underwrite loss-making productions for the company amounted to a financial interest and made it ineligible.

Following the judgements, Longborough’s founding trustee Martin Graham accused HM Revenue and Customs of cynically targeting arts organisations.

He said: “Just about every major arts organisation is a charity, which means that we get all sorts of tax breaks. The attraction of these targets is simply their turnover. Imagine the tax brigands salivating at the prospect of 17.5% of the Royal Opera House takings.”

BSO managing director Michael Henson said his company was now considering taking its case to the House of Lords. If successful, it could save up to £50,000 a year.

Henson told The Stage: “The Charities Commission says that charities should be professionally managed and pay the going rate to their executives, yet this judgement is saying you can’t be exempt from VAT if you have a high level executive administering your company.”

A spokesman for HMRC said the judgements confirmed its interpretation of the law and that it would continue to act “objectively and consistently in all cases”.