The Stage

Mayflower VAT victory opens gates for theatres nationwide to claim refunds

Published Tuesday 13 March 2007 at 15:10 by Alistair Smith

Theatres across the UK are in line for claims totalling millions of pounds in overpaid VAT, following the Court of Appeal’s recent refusal to overturn a rebate awarded to Southampton’s Mayflower Theatre.

Deloitte Indirect Tax director Simon Baxter, who represented the Mayflower in its bid to claim back excess VAT from HM Revenue and Customs amounting to £650,000, said that the ruling would mean other receiving houses run as charitable trusts would be entitled to seek similar refunds. He added that he also believed that the ruling could save large scale venues such as the Mayflower as much as £100,000 a year, with smaller theatres pocketing up to £50,000.

“The judgement from the Court of Appeal confirms that there is a link between the cost of hosting shows and the production of programmes, which are taxable supplies, as well as the sale of VAT exempt tickets,” he explained. “This provides for the recovery of VAT on associated costs, including a proportion of the productions.”

While this does not mean that venues will be able to claim back all VAT on production costs, it means that they should be able to claim VAT on the percentage which they can prove has been supported by the sale of programmes, rather than ticket sales. According to Baxter, venues which have already put in claims can ask for rebates dating back three years from the initial date. Meanwhile, he encouraged those who had not put claims in to do so as soon as possible to maximise the amount which they could potentially claim. He added that producing houses might also be eligible for refunds on part of the value of the work they toured.

The Court of Appeal’s decision to reject a plea by the taxman to overturn the decision marks the latest in a long string of court cases between HMRC and the Mayflower. Baxter said he was waiting to discover whether there would be one final appeal to the House of Lords, which HMRC would have to make imminently. If it does not, Baxter explained that venues who had already submitted their claims could start “knocking on HMRC’s door immediately.”

He added: “The Mayflower does feel a bit battered and bruised. It has now gone through three levels of litigation for which it will not be fully recompensed. At every chance, customs has tried to stop it. My client does feel a bit roughed up. It has been a continuous onslaught.”

For more information email sibaxter@deloitte.co.uk