TTR70030 - Not-for-profit organisations: indirect tax: Value Added Tax

Qualifying not-for-profit organisations pay VAT on supplies made to them. However, admission charges by an eligible body to a theatrical, musical or choreographic performance of a cultural nature are exempt from VAT.

An eligible body is a body, other than a public body, which:

  • cannot and does not distribute profits
  • applies any profits it makes to the benefit of its cultural activities, and
  • is managed and administered on an essentially voluntary basis by persons who have no direct or indirect financial interests in its activities.

A public body is:

  • a local authority
  • a government department, or
  • a non-departmental public body listed in the 1995 edition of the Office of Public Service’s publication ‘Public Bodies’.

Whether or not a theatrical, musical or choreographic performance is of a cultural nature will be determined according to the facts. However, HMRC generally accepts that live performances of dramatic productions and ballets are cultural for the purposes of this exemption.

Further information about this cultural exemption can be found at Public Notice 701/1 Charities (GOV.UK) and in Public Notice 701/47 Culture (GOV.UK).

Single not-for-profit organisation as Theatre Production Company

See the VAT guidance at Public Notice 701/1 Charities for how charities may be subject to VAT.

Theatre Production Company that is a wholly owned trading subsidiary of a not-for-profit organisation

Having the TPC as a wholly owned trading subsidiary of a not-for-profit organisation may lead to the supply of the theatre production being subject to VAT but the sales of tickets for admission being exempt.

In certain circumstances this may be rectified by using a VAT group. In a VAT group all parties have a joint and several liability for VAT. Further guidance on VAT groups may be found at VAT Notice 700/2: group and divisional registration (GOV.UK) and VGROUPS - Groups: main contents

A charity should take professional advice on the tax and any other implications of setting up a separate trading subsidiary.

It is not HMRC’s responsibility to provide advice on tax planning.