European Court VAT blow for not-for-profit cinemas

In what could be one of the last high profile UK VAT cases to be heard in a European Court, the Advocate General’s Opinion was published in the case of British Film Institute (C-592/15). The Court of Appeal referred this case to the European Court of Justice (“CJEU”) to consider whether the BFI’s main source of income (admission to films) can benefit from the VAT cultural services exemption and whether the European VAT Directive has direct effect in the UK. In the UK there is a cultural VAT exemption, though it is restricted to admissions to museums, galleries, art exhibitions, zoos and theatrical, musical or choreographic performances of a cultural nature.

HMRC’s current view is that admissions to films are not included.

The Advocate General’s (AG) opinion is that Member States do have discretion to decide which cultural services are exempt from VAT; however, CJEU will also consider whether excluding film admissions is contrary to the EU principle of equal treatment in relation to supplies by other operators. If the CJEU follows the AG’s decision, the BFI case will have to be referred back to the UK Court to decide whether the BFI is being denied equal treatment.

Many UK not-for-profit cinema operators have submitted claims to recover VAT previously accounted for on admissions so will be viewing this development closely. If you would like more information on this case or you think this case will have an impact on your organisation please do not hesitate to contact Iain Masterton, Senior VAT Manager or telephone 0131 558 5800.