The Stage

Taxman U-turn paves way for major touring theatre rebates

Published Friday 15 June 2007 at 11:25 by Nuala Calvi

A dramatic policy U-turn from HM Revenue & Customs is set to pave the way for theatre companies across the country to claim back tens of thousands of pounds in VAT wrongly paid on ticket sales.

Shared Experience, the theatre company behind shows such as Jane Eyre and Anna Karenina, has won a £50,000 windfall from the taxman, after it successfully argued that a cultural exemption from VAT on admissions charges should apply, even where tickets to its shows are sold through a theatre box office, rather than direct from the company.

The exemption came into force in June 2004 for non-profit making organisations administered on a voluntary basis, but for three years HMRC argued that it did not apply to theatre companies unless they were selling tickets directly to customers.

HMRC has now backtracked on that judgement and hundreds of organisations could now claim back three years’ worth of tax - potentially worth tens of thousands of pounds - if their contracts state that they own their ticket sales and that venues merely provide a ticketing service.

Anthony Pins, partner at media accountants Nyman Libson Paul and a member of the Institute of Chartered Accountants’ specialist entertainment group, explained: “For years, there have been disputes over the correct VAT treatment for theatres and production companies. The key point here was that the theatre was selling the tickets to the customer.

“What theatre companies need to do is ensure that the wording in their contract with theatres makes it clear the theatres are selling tickets on their behalf as a ticketing agency. However, anybody in this position should seek professional advice from accountants or lawyers.”

A string of building-based theatre companies have already won thousands back from the taxman after the government implemented the EU exemption on VAT on ticket sales.

Southampton’s Mayflower Theatre also recently won a rebate of £650,000, in a landmark ruling that allowed venues to claim back tax on production costs. HMRC attempted to overturn the High Court decision, but was defeated at the Court of Appeal.

The Shared Experience case is thought to be the first time that a touring company has managed to show the exemption from VAT on admissions also applies to them.

However, the company has been unable to claim back VAT for its West End productions, because the situation there is complicated by the widespread use of outside ticketing agents such as Ticketmaster.

Jon Harris, administrative producer at Shared Experience, told The Stage: “£50,000 is no small change to an organisation of our size and it also means that every production we put on in future will be worth up to £20,000 more to us.

“We want to encourage all non-building based companies to challenge HM Revenue & Customs, because as far as we know, no other companies have claimed this. What’s really frustrating is that it has taken so long. Just when we might have had to go to a tribunal, they caved in. I think, ultimately, it was just that we pushed hard enough.”

An HMRC spokeswoman said the department could not discuss individual cases or advise on tax planning.