COVID-19: Arts & Culture VAT and Gift Aid update.

These are difficult times for our all our clients, especially charities, and those in the theatre, arts, and heritage sectors have been particularly affected. In this article, we share the latest VAT and Gift Aid considerations for those in the Arts & Culture sector.

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Theatres, galleries, museums and artists in England who have been hit by the impact of Coronavirus will have access to a £160m emergency fund. Click here for more information.

HMRC have announced a VAT payment deferral and set up a specific Coronavirus dedicated helpline: call 0800 015 9559 if you expect, or are having difficulties paying tax. 

Refunds of tickets etc. 

If a venue is required to cancel an event as a result of the government’s advice on Coronavirus e.g. live performances, exhibitions, seminars, weddings, festivals etc. and the venue suggests that ticket holders might like to donate the money previously paid, rather than receive a refund – we can confirm that no VAT is due on the transactions.  This is the case in situations only where;

  • The event does not take place
  • The customer is entitled to a full, unfettered refund of the total amount paid
  • The refund changes to a genuine voluntary donation

If these conditions are not met, the VAT is still due to HMRC. 

Likewise, any admission fees that previously qualified for Gift Aid would continue to do so but adjustments will be needed if refunds are made in respect of Gift Aided admission fees.

As you’re aware, one of the conditions of Gift Aid is that the donations should not be subject to repayment. We therefore expect that any refunds of Gift Aided donations would be non-contractual and it is therefore important to record the rationale for making them to demonstrate that they were made for the benefit of the charity and constitute charitable expenditure. Although incurring non-charitable expenditure has tax consequences, it is also important from a charity law perspective and legal advice should be sought, especially if the amounts involved are large. 

Claiming gift aid on donated ticket costs for cancelled events

Charities in the cultural sector are able to claim Gift Aid when attendees agree to donate the money already spent on cancelled tickets rather than request a refund.  Although this should be permitted within the Gift Aid rules, the government has confirmed that these will  automatically be eligible for Gift Aid where events have been cancelled due to the coronavirus. 

This will enable theatres, museums, galleries and other exhibition centers registered as charities to get an extra 25p for every £1 not claimed back on ticket costs. 

Many charities in the sector, such as theatres are appealing to those who bought tickets to cancelled events to instead consider giving the money spent on tickets to help charities in this crisis, as other donations dry up. Gift Aid will help make more of these donations. 

“The charity will also need to make sure the patrons have made a gift aid declaration for their donations to qualify for gift aid, confirming that they have, or will have, paid enough tax to cover the amount the charity will claim on their donations” per parliamentary peer Theodore Agnew.

VAT Adjustment

If output tax on the admission ticket charge has been accounted for, the next return may be adjusted to credit the VAT previously paid. If a refund is made directly to the customer, again, no supply will have been made for VAT purposes and no output tax is due.

Deposits and VAT

If you have taken deposits from business customers for hire of your venue, stalls etc. and they will not now be going ahead, as well as your contractual agreements with the customer, you need to be aware of HMRC’s policy on deposits. HMRC’s policy since March 2018 is that VAT is due on all retained payments for unused services and/or uncollected goods. VAT already accounted for on the deposit must not be reduced, unless the payment is refunded. Only fully refundable deposits, paid as security are outside the scope of VAT.

This article was last updated on 02 April 2020.

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Get in touch

In these difficult times we appreciate that tax is way down the list of people’s priorities. Many businesses will suffer and some may not survive. If we can help in any way possible, please get in touch with your usual Buzzacott contact, or fill out the form below and one of our VAT experts will be in touch.

We will report further if there are any more concessions on VAT as soon as we are aware. We recommend that the HMRC guidance on Coronavirus should be monitored for the latest news and we will continue to share our insight on any pressing matters for our clients here.

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