Input tax recovery of theatre production costs: HMRC v Royal Opera House Covent Garden Foundation [2020] UKUT 132 (TCC)

03 Jun 2020 By Alfred Artley

Peter Mantle acted for Royal Opera House, instructed by Crowe UK LLP


Supplies of theatre and museum tickets fall within the ‘cultural exemption’ under Schedule 9 of the VAT Act 1994. However, the business model of many cultural venues does not rely solely on income from ticket sales. As well as funds from public grants and endowments, many venues also make taxable supplies of food and drink at on-site bars and restaurants, or sell other merchandise too. On the input side, venues will have paid VAT on the costs of staging productions or putting on exhibitions. The present appeal concerned whether the Royal Opera House’s production costs fell to be attributed solely to its exempt sales of tickets and taxable sales of programmes, or alternatively to a wider range of taxable supplies, principally its bar and restaurant offerings.

The opera house (“ROH”) relied on recent European caselaw to argue that in economic terms there was a direct and immediate link between its production costs and catering supplies. ROH succeeded before the First-Tier Tribunal on that basis (see [2019] UKFTT 329 (TC)), but the Upper Tribunal (Morgan J and Judge Timothy Herrington) have now overturned that decision.

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