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Oct

jet set performers PUBLISHED IN VAT

It amuses me to look for unlikely pairings of subjects, and here is one that tickled my proverbial fancy. The clue is in the title. Two changes take place with effect from 1 January 2011, one affecting “jet” and the other affecting “performers” (of the jet-set variety, for reasons that will become clear).

 

First, let’s look at “jet”. This refers to aircraft. Under rules applying until the end of 2010, aircraft supplies (including spare parts in some cases) can be zero rated as long as they are above a certain weight (and not adapted for “pleasure”!). But this changes in 2011, when the zero rate will only apply where the purchaser qualifies for it, and the weight criterion will be dropped. The purchaser will have to be a commercial airline that operates on predominantly international routes. This is intended to ensure beyond any doubt that VAT free aircraft cannot be obtained by people or companies which have a need or desire for such vehicles but could not reclaim all of the VAT.  For example, a large bank might want an executive international jet, and would prefer it to be zero rated because they cannot reclaim all of their VAT. From 2011 they will not be able to do this (unless they wish to open an international airline company and sell transport to themselves, but the hassle might outweigh the benefit). International airline businesses can reclaim VAT so the benefit to them is transient at best. This measure prevents a real benefit accruing to partly exempt organisations or “final consumers”.
 
Now, “performers”. This relates to actors, musicians, sportsmen/women, in fact, anyone who “performs”. The change only relates to physical performances, and will mainly apply only where they take place outside the UK. Under the 2010 rules, the VAT falls due in the country in which the performance takes place (and there are various alternative mechanisms for the VAT being duly paid). However, from 2011 the supply will be taxed where the customer belongs (again with various mechanisms applying). What does this mean in practice? 
 
An example is an actor touring a show abroad for a UK production company. Let us say he works in three locations on this tour: Spain, Ireland, and the UK. Under the current (old) rules, his supply would need to generate Spanish VAT for the performance in Spain, and Irish VAT for the performance in Ireland.  Either the actor or the production company would be responsible for these VAT liabilities, thus increasing the compliance burden for either or both. But from 2011, he must instead charge UK VAT to the UK production company, and there is no VAT to pay in the location of performance. The UK production company may have VAT to pay on selling tickets in Spain and Ireland, since that aspect will not change; and that is of no concern to the actor.
 
Say the production company is based not in the UK but in Ireland. The UK actor will “zero rate” his supply as an export to an EU business customer, and need not consider the possible obligations he currently has in respect of Spanish or Irish VAT. In addition he will also charge no VAT even for the performance in the UK, because the rule change means that the VAT is payable solely in the location of his business customer – the production company.
 
The change helps rationalise responsibilities for VAT for the jobbing performer.
 
A performer who self-promotes a show, and thus actually hires a venue and sells tickets, will need to account for VAT where the performance takes place. That does not change. What changes is the treatment of artistic services which contribute to a production organised by a promoter.
 

So, we have two ostensibly unrelated changes occurring at the same time. Time to check-in, and check-up on your preparedness for the new rules.

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