Bottomer and Another
| Jurisdiction | UK Non-devolved |
| Judgment Date | 23 October 2023 |
| Neutral Citation | [2023] UKFTT 893 (TC) |
| Court | First-tier Tribunal (Tax Chamber) |
[2023] UKFTT 893 (TC)
Tribunal Judge Ruthven Gemmell WS, Gill Hunter
First-Tier Tribunal (Tax Chamber)
In Derby Quad Ltd [2023] TC 08972 a charity which sold tickets to broadcasts of live theatrical performances was found to be making taxable supplies. Unlike tickets to see a live performance in a theatre, tickets to see the broadcast of that performance were not covered by the cultural services exemption in VATA 1994, Sch. 9, Grp. 13.
Derby Quad Ltd was a charity which ran a ‘cultural hub’ in Derby. One of its activities was the broadcast of live theatrical performances performed at the National Theatre. The charity considered that ticket sales for these broadcasts were exempt under item 2(b) of VATA 1994, Sch. 9, Grp. 13 because it was an eligible body supplying the right of admission to ‘a theatrical, musical or choreographic performance of a cultural nature’.
HMRC considered that the exemption was restricted to admission to the live performance (i.e. tickets to the National Theatre, not tickets to the broadcast from the National Theatre) and that therefore the income from ticket sales was standard rated.
In Chichester Cinema at New Park Ltd, the Tribunal had decided that the cultural services exemption in VATA 1994, Sch. 9, Grp. 13 did not extend to tickets to see films. The exemption derives from art. 132 Directive 2006/112 which exempts ‘the supply of certain cultural services... by other cultural bodies recognised by the Member State concerned’. In British Film Institute, the CJEU ruled that because this article gives member states considerable discretion it does not have direct effect and the UK was entitled to restrict the application of the exemption such that it didn’t apply to films shown at a cinema.
Derby Quad argued that its broadcasts of live theatrical performances were different from films (which are obviously pre-recorded) and that, because legislation is ‘always speaking’ the exemption should be interpreted in such a way that it keeps up with the technological developments which allow live theatrical performances to be broadcast.
However, the FTT agreed with HMRC that the broadcast performances were different from a live performance and fell outside the scope of the exemption. The FTT reached this conclusion for two reasons. First, it found that the evidence demonstrated clear differences between the ‘broadcast experience’ and the ‘live experience’, most notably there was a lack of interaction between the audience and the performers, and as a result the broadcast performances were cinematic screenings (para. [228]).
Secondly, it found that the exemption should be narrowly construed and that the always speaking doctrine must be applied narrowly (para. [259]). The FTT was heavily influenced by the Supreme Court’s ruling in News Corp UK & Ireland Ltd v R & C Commrs in which it was found that the zero-rating for newspapers contained in item 2 of VATA 1994, Sch. 8, Grp 3 only applied to the print version, it did not extend to the digital version (the case concerned supplies made before the legislation was amended to zero-rate digital publications with effect from 1 May 2020). Just as the FTT had found many differences between the ‘live experience’ and ‘broadcast experience’ of a theatrical performance, the Supreme Court found many differences between digital and print versions of newspapers.
Having concluded that the supplies made by Derby Quad Ltd were taxable, the FTT then ruled that HMRC’s assessments had been issued within the time limits specified by law. As a consequence the assessments were valid and the appeal was dismissed (para. [274]).
The FTT reached a logical conclusion, its analysis of the Supreme Court decision in News Corp UK & Ireland Ltd v R & C Commrs will be of interest to other persons who consider that technological advances mean that the scope of VAT reliefs should be expanded.
Comment by Sarah Kay, Lead Technical Writer, Croner-i Ltd.
Mr Gavin West, Partner of PKF Smith Cooper, Derby (“counsel for DQ/ GW”) appeared for the appellant
Mr Max Schofield, of Counsel, instructed by HM Revenue and Customs' Solicitor's Office (“counsel for HMRC”) appeared for the respondents
[1] The form of the hearing was by video, and all parties attended remotely. The remote platform used was the Tribunal video hearing system. The documents which were referred to comprised of a Hearing bundle of 718 pages and Skeleton Arguments for both parties.
[2] Prior notice of the hearing had been published on the gov.uk website with information about how representatives of the media or members of the public could apply to join the hearing remotely in order to observe the proceedings. As such, the hearing was held in public.
[3] The Appellant, Derby Quad Limited (“DQ”), appealed against assessments, raised for VAT periods 03/17 to 12/18 inclusive, for under declared VAT on admission charges to live event performances broadcast to DQ from other locations (“Live Events”). If the Tribunal find that VAT is due, DQ claim that the Respondents (“HMRC “) were out of time to raise the assessments. A third ground of appeal regarding “legitimate expectation” was not proceeded with.””
[4] DQ was registered for VAT from 1 July 2007, under VAT registration number 125522538, with a registered address at Market Place, Derby, DE1 3AS.
[5] DQ's business activity is described as a venue that provides “visual arts and media centre, art exhibition and workshops, cinema, café bar, corporate room hire and training”.
[6] On 12 July 2016, HMRC received DQ's voluntary disclosure for overpaid VAT for the periods 30 June 2012 to 31 December 2015 inclusive. The claim was made under Item 2, Group 13, Schedule 9, VAT Act 1994.
[7] On 17 October 2016, DQ provided more information in relation to their voluntary disclosure for overpaid VAT.
[8] On 24 October 2016, HMRC issued an assessment for periods 09/12 to 12/15, inclusive, in the sum of £129,509.00.
[9] On 14 March 2017, DQ wrote to HMRC to advise that, following the ECJ decision in R & C Commrs v British Film Institute(Case C-592/15) [2017] BVC 11, they would like to pay the assessment on a “without prejudice” basis.
[10] DQ made a further voluntary disclosure in relation to Live Events for periods 03/16 to 12/16, inclusive, in the sum of £14,000.69.
[11] On 17 March 2017, HMRC issued DQ with a Notice of Error Correction for periods 03/16 to 12/16 inclusive, in the sum of £13,997.00.
[12] On 7 June 2017, HMRC wrote to DQ to advise that they had incorrectly processed DQ's voluntary disclosure, dated 14 March 2017.
[13] On 29 June 2017, HMRC wrote to DQ advising that the Notice of Error Correction issued on 17 March 2017 had been withdrawn and that a payment in the sum of £14,005.00 would be made. This letter said that the payment had been made without a detailed review of the information supporting the voluntary disclosure.
[14] The parties subsequently entered discussions about DQ's Partial Exemption Special Method (PESM), which is not under appeal. During these discussions further information was provided in relation to the Live Events that DQ had previously claimed as being exempt from VAT.
[15] On 12 December 2018, HMRC wrote to DQ advising that they had been informed by one of their staff members that DQ charged no VAT on admission to screenings of broadcasts of Live Events and that these admission charges would not qualify for exemption, under the provisions of Group 13, Schedule 9, VAT Act 1994.
[16] HMRC went on to state that the previous claims in relation to Live Events should not have been repaid.
[17] On 22 January 2019, DQ's agent emailed HMRC to advise that HMRC were out of time to issue assessments and that DQ had a legitimate expectation that their VAT treatment of admission to Live Events was correct until they received HMRC's letter of 12 December 2018.
[18] On 4 April 2019, DQ's agent emailed HMRC advising that DQ had accounted for VAT on all income from Live Events since receipt of HMRC's letter of 12 December 2018.
[19] Further correspondence was exchanged by the parties in relation to whether the assessments were raised on time.
[20] On 30 May 2019, HMRC wrote to DQ's agent further discussing HMRC's view as to what constitutes a Live Event in order to qualify for exemption under Group 13, Schedule 9, VAT Act 1994.
[21] HMRC stated that the screenings of Live Events did not amount to a “live performance”, and that DQ's letters notifying HMRC of voluntary disclosures could not amount to HMRC having sufficient information to make an assessment at that time.
[22] On 8 July 2019, DQ's agent provided information in support of their application for an amended PESM, which included a breakdown of income received from broadcasts of Live Events.
[23] On 4 September 2019, HMRC wrote to DQ advising that HMRC were enforcing the assessments for periods 09/12 to 12/15 inclusive of £129,509.00.
[24] On 23 December 2019, HMRC issued a Notice of Assessment covering the periods 03/17 to 09/19 inclusive, in the sum of £26,751.00.
[25] On 22 January 2020, DQ's agent wrote to HMRC appealing the assessments covering periods 03/16 to 12/16 inclusive, in the sum of £14,000.69 and the periods 03/17 to 12/18 inclusive, in the sum of 26,751.00.
[26] On 27 August 2020, HMRC wrote to DQ with a review conclusion letter upholding the decisions as initially made.
[27] On 12 January 2021, DQ's agent emailed HMRC providing detailed information about their agreements with various theatre production companies and forwarded contracts and advertising documentation. This included detail...
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