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HMRC internal manual

VAT Cultural Services

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HM Revenue & Customs
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VAT on cultural services: origin of the exemption

The cultural exemption was introduced in the UK on 1 June 1996, giving effect to the mandatory exemption originally set out in Article 13(A)(1)(n) of the 6t h VAT Directive (77/388/EC) for:

(n) certain cultural services and goods closely linked thereto supplied by bodies governed by public law or by other cultural bodies recognised by the member state concerned;

When the 6t h Directive was redrafted as the Principal VAT Directive (2006/112/EC) the wording of the cultural exemption, included at Article 132(1)(n), was slightly amended to:

the supply of certain cultural services, and the supply of goods closely linked thereto, by bodies governed by public law or by other cultural bodies recognised by the Member State concerned.

The introduction of the exemption followed amendments to the 1978 European Council agreements which had previously allowed the UK to tax all cultural services. Although the UK had believed that these amendments did not require any change to existing arrangements, we accepted, following legal challenge, that some supplies of cultural services supplied by public authorities or other eligible cultural bodies were required to be exempt. As the agreements were amended with effect from 1 January 1990, it was possible in some limited circumstances for cultural bodies to also backdate their exemption to this date.

The exemption was introduced following a consultation exercise which established that the vast majority of cultural bodies (with the exception of zoos) were opposed to exemption, as many were grant-funded and in a VAT repayment position. Exemption would therefore be a financial disadvantage for them.

Accordingly, the exemption was narrowly drawn and included the imposition of conditions as allowed for under Article 133 of the Principal VAT Directive 2006/112/EC, formerly Article 13(A)(2)(a) of the 6th VAT Directive.