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This publication is available at https://www.gov.uk/government/publications/vat-notice-70147-culture/vat-notice-70147-culture
This notice cancels and replaces Notice 701/47 (December 2003). Details of any changes to the previous version can be found on our website www.hmrc.gov.uk
1.1 What is this notice about?
This notice explains when admission charges to certain cultural exhibitions and events can be exempted from VAT, and by whom. It also covers the exemption of fund-raising events by certain cultural bodies.
1.2 What has changed?
This notice has been restructured and rewritten to improve readability and replaces the December 2003 edition.
Other main changes are:
- removal of paragraph 8
- removal of paragraphs 9-11. These paragraphs referred to the revised policy related to the interpretation of ‘managed and administered on an essentially voluntary basis’ which was introduced on 1 June 2004. This information has either been amalgamated into the new Public Notice or removed as details on transitional arrangements are no longer needed
You can access details of any changes to this notice since August 2011 on our internet website at www.hmrc.gov.uk or by telephoning the Helpline on Telephone: 0300 200 3700.
This notice and others mentioned are available on our website.
1.3 Who should read this notice?
You should read this notice if you charge for admission to venues, sites, events or performances of a cultural nature.
1.4 What law does this notice cover?
|The relevant law covering…||is the Value Added Tax Act 1994…|
|admission charges to cultural events||Schedule 9, Group 13|
|fund-raising events||Schedule 9, Group 12|
2. Qualifying Services
2.1 Who can exempt admission charges?
The exemption of admission charges is restricted to:
- public bodies and
- other cultural bodies that satisfy certain conditions – these are referred to as ‘eligible bodies’
Sections 3 and 4 provide details on the qualifying conditions for exemption for each of these types of bodies.
2.2 Do all admission charges qualify for exemption?
No. Only admission charges to museums, galleries, art exhibitions and zoos and theatrical, musical or choreographic performances of a cultural nature qualify for exemption.
2.3 What is the definition of a museum, gallery, art exhibition or zoo?
This has to be judged by reference to the normal everyday meaning of the words, taking into account indicative evidence such as the nature of the collections, objects, artefacts, site and exhibits on show for example. However, for the avoidance of doubt, a botanical garden does not qualify for exemption.
2.4 What is meant by a theatrical, musical or choreographic performance of a cultural nature?
Each event has to be judged on its individual merits. However, where live performances of stage plays, dancing or music are considered to be cultural (as they generally are) they will qualify for exemption.
2.5 Why is there no provision for the exemption of goods?
Programmes, which are normally the most closely linked goods, are already zero-rated as printed matter with the result that exemption of programmes would be of no benefit.
3. Scope of the exemption for public bodies
This section describes how public bodies are affected and sets out the preconditions for exemption.
3.1 What types of public bodies are affected?
Local authorities, government departments and those non-departmental public bodies which are listed in the Cabinet Office publication ‘Public Bodies’.
3.2 Are all supplies of qualifying admissions by public bodies exempt?
No. Exemption does not apply where:
- exemption of admission charges would be likely to distort competition to the disadvantage of a commercial supplier of similar services (refer to 3.8)
- the public body enters into a joint venture or profit/income-making arrangement with anyone other than another public or eligible body
An example of a joint venture which would not qualify for exemption is one where the local authority acts as a ticket broker for a commercial promoter or has a profit/income sharing arrangement with that promoter for a qualifying performance.
An example of a joint venture which would qualify for exemption is one where the local authority sells tickets for a qualifying performance on behalf of an eligible body (the criteria for eligibility are explained in section 4).
The following paragraphs 3.3 to 3.10 explain the arrangements for judging distortion of competition.
HM Revenue and Customs (HMRC) holds the view that it is entitled, under the terms of current EC agreements, to take a national and overall view of competition where admissions to the various cultural activities are supplied by public bodies. It is necessary therefore to establish at the outset whether commercial suppliers of cultural activities may be placed at relative disadvantage if similar supplies made by a particular public body are treated as exempt. However, once this has been done it is not necessary to apply this test to each future separate performance.
3.4 What does a public body have to do to satisfy the non-distortion requirement in order to exempt admissions of a qualifying nature?
It must take steps to notify all identifiable commercial suppliers of related facilities or performances. For example, a local authority will need to identify from its business rating, planning, taxation and other records, any such supplier within its geographical area of responsibility and to notify in writing its intention of introducing exemption to all those suppliers. This could be by individual letter or by public notice in the local press for the authority’s geographical area, which will need to specify a date (say 30 days) by which any objection to exemption has to be lodged.
3.5 What does the public body do, once the period allowed for objections has expired and none have been received?
The public body can start to exempt the supplies advertised for exemption but must retain copies of the relevant correspondence and advertisements for future examination.
3.6 What does the public body do on receipt of objections?
If it still wishes to exempt and disagrees with the objection, the public body should forward details of the intended exemption together with copies of the relevant correspondence to HMRC. The Helpline will be able to provide the address of the office to where the information should be sent. It should not exempt any supplies which are in dispute until the matter has been resolved.
3.7 If a public body is unable to identify any commercial supplier of similar services, will it still be able to tax admissions of a qualifying nature?
Yes. It is Customs’ policy that a public body will not have to exempt, if it does not wish to, but this will remain subject to review.
3.8 What is meant by ‘similar services’ in paragraph 3.2?
In identifying commercial suppliers who may be disadvantaged by exemption, a public body will only need to look at museums, galleries, art exhibitions and zoos or theatrical, musical and choreographic performances in isolation. For example a public body wishing to exempt admission charges to a museum would have to demonstrate that it would not disadvantage commercial museums, galleries, art exhibitions and zoos within its geographical area, but would not have to take account of commercial theatrical, musical and choreographical performances.
Correspondingly, in judging whether exemption of theatrical performances of a cultural nature would disadvantage a commercial supplier, it will be sufficient for the public body to take account of all commercial suppliers of theatrical, musical or choreographic performances within its geographical area - it will not be necessary to take account of commercial museums, galleries, art exhibitions or zoos.
3.9 Will it be necessary to check the competitive position on the occasion of each theatrical, musical or choreographic performance?
No. One comprehensive enquiry along the lines of that set out in paragraph 3.4 will be sufficient.
3.10 Is it necessary to make periodic checks to ensure that no new commercial supplier of similar services objects to exemption?
No. It will be for that supplier to make a case direct to HMRC as the occasion arises. The Helpline will be able to provide the supplier with the address of the office where they should send their information.
4. Scope of exemption for eligible bodies
This section describes how a cultural body that is not a ‘public body’ (as explained in 3.1) can qualify for treatment as an ‘eligible body’ enabling it to exempt admission charges of a qualifying nature.
4.1 What are the conditions for qualification?
To exempt admission charges to qualifying activities, an organisation must, as an eligible body, satisfy all of the following conditions. It must:
- be a non-profit making organisation - see paragraph 4.4
- apply any profits made from exempt admission fees under this provision to the continuance or improvement of the facilities - see paragraph 4.5 and
- be managed and administered on an essentially voluntary basis, and by people who have no direct or indirect financial interest in the activities of the body - see paragraph 4.6
4.2 Who is likely to qualify for exemption?
Non-profit making organisations which charge for admission to the qualifying services described in section 2.
4.3 Who will not qualify for exemption?
A body which fails one or more of the conditions detailed in paragraph 4.1. For example, a body which:
- distributes or covenants profits to a third party, including parent or associated companies (but see paragraph 4.4 for the meaning of distribution)
- applies profits from admission fees to activities unrelated to the continuance or improvement of the facilities to which the admission fees are charged
- has at least one person who manages and administers it at the highest level and exercises a right to a commercial rate of remuneration
4.4 What is a non-profit making organisation?
It is an organisation that does not systematically aim to make a profit and which, if profits nevertheless arise, must not distribute them.
A body whose constitution or articles of association preclude it from distributing surpluses of income over expenditure to its members, shareholders or any other party (other than in the event of a liquidation or cessation of activities), and which as a matter of fact does not distribute any profit, will normally be accepted as having satisfied this condition for the purposes of this exemption.
Note – for the purposes of this exemption, distribution of profit does not include grants or donations made by charities in pursuit of their wider charitable objectives.
4.5 How does a body satisfy the application of profit condition?
To qualify for exemption, all profits arising from exempt admission fees must be:
- used for the continuance or improvement of the facilities made available to the fee-paying public by payment of the exempt admission fees
- applied in connection with the making of related cultural supplies (such as research or conservation projects)
If profits are applied to any other activities of the body than those above, the body is not eligible for exemption.
4.6 When is a body managed and administered on an essentially voluntary basis and by people who have no direct or indirect interest in the activities of the body?
To determine whether this twofold condition is met, you need first to consider:
- who manages and administers the body - see paragraph 4.7
- then establish that those who are identified as managing and administering the body
have no direct or indirect financial interest in the activities of the body - see paragraph 4.8 and do so on an ‘essentially voluntary basis’ - see paragraph 4.12.
4.7 Who manages and administers the body?
In determining who manages and administers a body, you should only consider those members who take the decisions of last resort concerning the policy of a body, particularly in the financial and strategic areas, and carry out the higher supervisory tasks. In other words, those who determine what a body will do and how it will do it. For the purposes of this condition, persons who carry out purely executory tasks (those who implement, rather than take high level decisions) can be ignored.
To determine who takes the decisions of last resort, you should consider:
- the constitution or articles of association to identify the members of the directing organs and their specific tasks
- what actually happens in fact. In other words, you should also consider those persons who, without being so designated within the constitution, take rather than implement policy decisions at the highest level as described above
4.8 What is meant by direct or indirect financial interest in the activities of a cultural body?
A person can have a direct or indirect financial interest in the activities of a body if he receives or has a right to remuneration; takes up an ‘as of rights’ provision (as defined in 4.11); or is in any other way rewarded directly or indirectly by the body; or has any other financial interest in the body. This financial interest has to be actual not potential.
A person who is managing and administering the cultural body on a voluntary basis can be seen to have an actual financial interest in its activities only when:
- the person receives any payments for services supplied to the cultural body above the market rate, paid as routine overheads, or the payments made are profit-related (whether below, at or above market rates)
- there is a link between the payments and the person’s participation in the direction of the cultural body’s activities
4.9 What is meant by remuneration?
For the purposes of this notice only, remuneration means a commercial rate of pay or profit-related payment. Hence the making of a token payment only or payments solely to reimburse out-of-pocket expenses would not disqualify a body from exemption provided all other conditions were met.
4.10 What is not seen as a direct or indirect financial interest?
A financial interest does not exist where the only potential is for a financial loss - for example where a risk is underwritten or guaranteed, so that the guarantor only stands to be impoverished and not enriched as a result.
If a person has a right to a remuneration, but for whatever reason formally opts not to take it, then this ‘right’ will not disqualify the body from exemption - until, the person starts exercising his/her right to a remuneration.
Similarly, payments to individuals for services of managing and administering the body (within the meaning of the cultural exemption) are not financial interests if:
- they are allowed by the constitution
- the recipient is excluded from any decision making regarding the award of any contract to themselves
- the payments are not above market rates
- are not linked to profits
4.11 What if persons are covered by an ‘as of right’ provision?
Some constitutions include an ‘as of right’ provision. This gives a trustee the right to charge and be paid reasonable remuneration for (typically professional) services within the scope of the body. The right does not depend on the body or its trustees entering into a contract with the trustee affected.
‘As of rights’ provisions are often not exercised for long periods, or are used intermittently. The presence of such a clause in itself (i.e. where it has not been exercised) will therefore not disqualify a body from exemption. It is only as and when remuneration is made under this clause that the potential arises for it to cause disqualification from exemption. However, this will depend on the frequency, number and size of any payments made. See paragraph 4.12 for further details.
4.12 What is meant by ‘essentially voluntary’?
To satisfy the condition governing the management and administration of a body, a body need only be essentially, not exclusively, managed and administered on a voluntary basis by persons with no direct or indirect interest in the activities of the body. Therefore, having identified those persons who manage and administer the body, and have a direct or indirect financial interest in its activities, consideration needs to be given to the issue of ‘essentially voluntary’.
The fact that remunerated staff take part occasionally or peripherally in the adoption of the decision of last resort will not, in itself, disqualify a body from exemption.
However, if one or more persons identified as managing and administering the body at the highest level receives remuneration, then the body will not qualify for exemption.
In the case of ‘as of rights’ provisions, the issue is one of degree -that is, the frequency, number and size of any payments made - and each case will turn on its own facts. It is recommended that if you consider that your continued eligibility or otherwise for exemption turns on payments made under an ‘as of rights’ provision, that you seek a ruling from HMRC. The Helpline will be able to provide the address of the office to where the information should be sent
5. Scope of the exemption for fund-raising events
Non-public cultural bodies which meet the preconditions for exemption set out in section 4 and qualify as an ‘eligible body’ are able to qualify for exemption for fund-raising events.
Any supply of goods or services by an ‘eligible body’ in connection with a fund-raising event organised exclusively for its own benefit is deemed to be exempt. Examples of fund-raising events that qualify for exemption are a one-off fête, ball, dinner-dance, bazaar, gala, show or performance.
There is more information on the exemption for fund-raising events available in the helpsheet entitled Helpsheet Fund-raising events: Exemption for charities and other qualifying bodies.)
6. Partial exemption
This section explains how the introduction of exemption may affect entitlement to claim input tax and explains where to obtain further information.
6.1 Input tax related to exempt supplies
If you are VAT registered, and are making exempt supplies and incurring input tax in doing so, then you are partly exempt. You will not be able to claim all of the input tax you incur unless you fall within the ‘de-minimis’ limits. These are set out in VAT Notice 706 Partial exemption.
6.2 If my input tax is restricted, what amount can I claim?
To calculate the amount of input tax which can be reclaimed, it is necessary to use a method to work out the amount of recoverable input tax. There is a standard method which anybody can use without prior approval. If the ‘standard’ method is used, then the amount of input tax which can be reclaimed depends on the ratio between the value of your taxable supplies and the value of all your supplies. If you do not think that the standard method gives you a fair result then you can apply for a ‘special’ method. ‘Special’ methods are unique to the business and can be tailored to deal with particular business circumstances. However, prior written approval must be obtained from HMRC before you may use one.
6.3 Where can I get more information on partial exemption?
See VAT Notice 706 Partial exemption.
7. Cultural exemption legislation - Group 13, Schedule 9 Value Added Tax Act 1994
|1.The supply by a public body of a right of admission to -
(a) a museum, gallery, art exhibition or zoo; or
(b) a theatrical, musical or choreographic performance of a cultural nature
2.The supply by an eligible body of a right of admission to -
(a) a museum, gallery, art exhibition or zoo; or
(b) a theatrical, musical or choreographic performance of a cultural nature.
(1) For the purposes of this Group ‘public body’ means -
(a) a local authority;
(b) a government department within the meaning of section 41(6); or
(c) a non-departmental public body which is listed in the 1995 edition of the publication prepared by the Office of Public Service and known as ‘Public Bodies’.
(2) For the purposes of item 2 ‘eligible body’ means any body (other than a public body) which -
(a) is precluded from distributing, and does not distribute, any profit it makes;
(b) applies any profits made from supplies of a description falling within item 2 to the continuance or improvement of the facilities made available by means of the supplies; and
(c) is managed and administered on a voluntary basis by persons who have no direct or indirect financial interest in its activities.
(3) Item 1 does not include any supply the exemption of which would be likely to create distortions of competition such as to place a commercial enterprise carried on by a taxable person at a disadvantage.
(4) Item 1(b) includes the supply of a right of admission to a performance only if the performance is provided exclusively by one or more public bodies, one or more eligible bodies or any combination of public bodies and eligible bodies.
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