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The Court of Appeal has today ruled in favour of the Mayflower Theatre Trust Limited in its bid to recover a proportion of the VAT charged on the cost of hosting theatrical productions.  The Trust had already won at the High Court, but HM Revenue & Customs (HMRC) appealed the decision.  The decision to dismiss HMRC’s appeal will enable many theatres across the country to increase the level of claims for VAT previously overpaid and may also reduce the costs of productions going forward.

VAT exemption on ticket income for performances staged at theatres was introduced in 1996.  As a result of the exemption, theatres were no longer able to claim back all the VAT charged on related costs, meaning that for many the cost of staging a production increased over night.  Last April, Mayflower successfully argued that the fees paid to production companies for the right to host productions were not solely related to the VAT exempt sale of tickets. The decision of the Court of Appeal reaffirms that a proportion of this VAT is recoverable. 

Simon Baxter, indirect tax director at Deloitte, comments:  “Whilst the High Court agreed with Mayflower, the scope of the Court of Appeal’s judgment means that many similar businesses will be entitled to seek a refund of previously overpaid VAT from HMRC.”

“The judgment from the Court of Appeal confirms that there is a link between the cost of hosting shows and the production of programmes, which are taxable supplies, as well as the sale of VAT exempt tickets.  This provides for the recovery of VAT on associated costs, including a proportion of the production costs.”

“As such, I expect it to present a much broader opportunity for UK theatres and other cultural organisations to reclaim a significant amount of VAT.”

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Notes to editor:

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