Theatres eye 'massive' tax rebate

Massive amounts of VAT dating back to 1993 could still be reclaimed from Customs and Excise by theatres that have yet to take advantage of changes in legislation, a leading accountancy firm has advised delegates at the annual Theatrical Management Association conference in Nottingham.

Many managements have already benefited from the long-awaited implementation of the European Union directive, passed by Brussels in 1990, granting exemption to a wide range of cultural services and relieving hard-pressed organisations of a heavy tax burden. Guidelines provided by the European Court of Justice state that non-profit theatres should no longer pay tax and under British law, venues can reclaim VAT backdated to June 1993 – three years before the original EU legislation was implemented in the UK. However, experts believe the government is avoiding having to pay out large rebates by limiting claims to three years prior to application and theatres are being punished because Customs failed to apply the EU directive when it was first passed in 1990.

Simon Baxter, director of the indirect tax practice of Deloitte, said: “In the run up to June 2003 a lot of organisations stood still because there was still a lack of clarity and they wanted to see what would happen next. They held off lodging claims on overpaid VAT at that stage and as a result lost out on years of potential refunds.

“You are never out of time to make a three-year claim but we will continue to negotiate with Customs at a national level and make the argument that, had there been more clarity from the government, more people would have acted sooner. Customs will do everything to try to avoid paying the money but we are prepared to go to the European Court of Justice if necessary.”

Whitehall applied a narrow interpretation of the law when it was first implemented in the UK, declaring non-profit bodies reclaiming VAT could not include those with salaried staff. A case launched by London Zoo prompted a clarification by the European Courts in 2002, overruling the British government, which meant most theatres became eligible for tax exemption. While the tax exemption has been beneficial to most theatres, for some it will spell disaster as under new guidelines venues are unable to claim tax back on capital spending.