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VAT cultural exemption

21st February 2017

VAT Cultural exemption

The Court of Justice of the European Union has given its decision in the British Film Institute (BFI) case and sadly has followed the Advocate General’s opinion and ruled that the BFI’s argument that the cultural exemption applied to the sale of tickets to its film screenings does not apply.

The case hinged on the meaning of the word “certain cultural services”. The BFI argued that the UK’s implementation of the exemption was too narrow; exempting as it does only the right of admission to a museum, gallery, art exhibition, zoo, and musical, theatrical and choreographic performances.

The Court decided that it was up to individual Member States to determine which cultural services they included within the exemption.

Transfer of assets to the State in payment of a tax debt

By contrast, it is to be hoped that the Court does follow the Advocate General’s opinion in the case of Posnania Investments, a Polish case. Here the Polish Government and the European Commission argued that the transfer of an asset to the Polish Government in satisfaction of a tax debt was itself a taxable supply for VAT purposes.

This was under a specific provision of Polish law but by analogy it could have meant that if HMRC sent in bailiffs to seize goods in lieu of payment of a tax debt, it would actually further increase the debt because it would be a taxable supply of those goods on which VAT would have to be accounted.

Happily the Advocate General has opined that the transfer of assets in such a situation is not a business activity, and therefore no VAT is chargeable. It is to be hoped that the Court follows this opinion.