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HMRC internal manual

VAT Cultural Services

VAT on cultural services: third party payments

Trustee remuneration can sometimes be made by third parties with either a corporate or a funding link with the cultural body - for example where the cultural body is part of a corporate group and the cultural body chairman is in receipt of a significant salary for his role as group chairman.

In these cases, the status of the cultural body as an eligible/non-eligible body will depend on the individual circumstances of the case. While it is not impossible for a trustee to be independent in such cases, it is more likely that the cultural body will assume a commercial element and, as such, be debarred from exemption. Each case must be considered on its merits.

In assessing the merits of such cases, consideration should be given to:

  • the precise relationship between the cultural body/chairman and group company/chairman in terms of inter-body finance,
  • chairman remuneration/duties, and
  • the level of influence of the parent/funding body on the strategic direction and policy of the cultural body.

Where, conversely, the group structure is such that the cultural body controls the third party paying the remuneration, the body will be disqualified from exemption.

If in doubt, please seek advice from the VAT Advisory Team.