20268

VAT – exemptions – cultural services – films shown at arts centre – appeal dismissed.

LONDON TRIBUNAL CENTRE

	THE CORN EXCHANGE NEWBURY	Appellant

-	and –

	HER MAJESTY’S REVENUE AND CUSTOMS 	Respondents

				Tribunal:	 (Chairman) Richard Barlow
						 (Member) Mrs Ruth Watts Davies

Sitting in public in London on 4 May 2007

Mr David Moll VAT Consultant for the Appellant 

Mr Robert Kellar of counsel for the Respondents

© CROWN COPYRIGHT 2005

DECISION

1.	The appellant appeals against a decision contained in a letter dated 13 July 2006 by which the respondents notified the appellant that sales of tickets to members of the public who attended cinema shows in premises operated by the appellant were payments for standard rated supplies for the purposes of VAT.

2.	The appellant was represented by Mr David Moll and the respondents by Mr Robert Kellar.  We heard evidence form Mr Martin Sutherland who is the Chief Executive of the appellant and whose evidence was not challenged by Mr Kellar.  Documents consisting of correspondence between the parties and leaflets illustrating the appellant’s activities were also produced.  One leaflet set out the various activities of the appellant from April to July 2007.  It makes it clear that films will be shown as part of those activities and another leaflet set out the films that would be shown.  The reason why there was a separate leaflet for films is that the films to be shown are decided upon at shorter notice than some of the other activities.

3.	The appellant is a Trust and its activities consist of providing a range of activities at the Corn Exchange in Newbury which has been converted into a theatre and at other premises in Greenham Common as well as an outreach programme.

4.	The performances cover theatre, dance, music and comedy as well as film and the organisation can be accurately described as a provider of the Performing Arts in the Newbury Area.

5.	The issue in this appeal is whether the sale of tickets for cinema shows should be exempt from VAT as falling within Group 13 of Schedule 9 to the VAT Act 1994 which exempts certain cultural services.  The relevant wording is as follows:

“Item No
1.	The supply by a public body of a right of admission to-
(a)	a museum, gallery, art exhibition or zoo; or
(b)	a theatrical, musical or choreographic performance of a cultural nature.
2.	The supply by an eligible body of  a right of admission to-
(a)	a museum, gallery, art exhibition or zoo; or
(b)	a theatrical, musical or choreographic performance of a cultural nature.”

6.	It is not in dispute that the appellant is an eligible body but it is not a public body.

7.	The appellant also relies upon Article 13A(1)(n) of the VAT Sixth Directive which reads:

“Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any possible evasion avoidance or abuse:

…
(n) certain cultural services and goods closely linked thereto supplied by bodies governed by public law or by other cultural bodies recognised by the Member State concerned;”

8.	Although the ordering of the relevant articles in the Common System Directive that has replaced the Sixth Directive is somewhat different the wording is materially the same.

9.	Article 13 is somewhat paradoxical in that having directed that Member States “shall exempt” the following supplies subparagraph (n) and some of the other subparagraphs, by referring to “certain services”, appears to leave it to the Member States to decide precisely which such services are to be exempted.

10.	Mr Kellar submitted on behalf of HMRC that only live performances fall within the exemption provided in Group 13 as that is the meaning of the word “performance” and that, in particular, there is no doubt that a film is not a performance.  He illustrated his point by suggesting that a person who bought a ticket for “a performance” of a particular work, say Shakespeare’s Hamlet, would not be satisfied and would have cause to complain if, upon arriving at the place where the “performance” was to take place, he found that the event would consist of the showing of a film of Shakespeare’s Hamlet.  We agree there is a good deal in that point and that the natural meaning of the word performance is that it refers to a live event.  This is especially so in the context of the VAT Act where the word performance is modified by the adjectives “theatrical, musical and choreographic”, all of which naturally imply live performance. In the case of a theatrical performance a live performance is really the only type of event that could be described as a performance at all.

11.	Mr Kellar did not dispute that films are of a cultural nature, or at least that they can be, but he said that is no answer to the basic point that they cannot constitute a performance.

12.	Mr Kellar placed strong reliance on the previously decided Tribunal case of Chichester Cinema at New Park Limited –v- The Commissioners of Her Majesty’s Revenue and Customs (Decision 19344).  In that case the Tribunal held that the phrase used in Group 13 Item (2)(b) of schedule 9 to the VAT Act is limited to live performances both on the ground already referred to (the natural meaning of the word) and upon the ground that the omission of the word “cinematic” in the legislation is unlikely to have been accidental had the legislature intended to exempt cinema.    

13.	This Tribunal does not regard the fact that Annex H to the Sixth Directive allows Member States to apply a reduced rate to cinema admissions as having much relevance to whether it is included in the exempting provisions.  Mr Kellar pointed out that it does at least show that the Sixth Directive did make a distinction between cinema and theatre by mentioning both in that context.  We do not doubt the logic of that submission but we do not think it adds much to the conclusion we have reached.

14.	We agree with Mr Kellar’s submissions and hold that the showing of a film does not constitute a performance within the meaning of that word in item 2(b) of Group 13.

15.	Mr Moll had submitted that actors who take part in filming are performing their roles just as much as theatre actors and we agree with him but it does not follow that the end result is a performance any more than, for example, a surgeon who performs an operation is thereby creating a performance.  In the case of a film each actor might be described as performing a role or perhaps even as having given a performance but the film itself is not a performance.  A real distinction between what an actor does in the film studio and what an actor does in a theatre is that in the theatre the play will be performed in one take, so to speak, which is not the case in the film studio and it is in that context that to say a film is a performance would not be correct.   

16.	We do not consider that the wording of the Sixth Directive precludes Member States from distinguishing between theatre and film for the purpose of cultural services.  That is open to the Member States because the phrase “certain cultural services” leaves a margin of discretion. 

17.	In the circumstances we dismiss the appeal.

CHAIRMAN

RELEASED: 24 July 2007

LON/06/0821