Are you registered for VAT? Do you currently account for VAT on admission charges to your museum, gallery, art exhibition, zoo, or to theatrical or choreographic performances of a cultural nature? If the answer to both of these questions is 'YES', then you need to review your VAT position urgently if you have not already done so.
Under UK law, charges for admission to the above are exempt from VAT when supplied by an 'eligible body'. An eligible body is an organisation which meets all of the following conditions:
- is precluded from distributing, and does not distribute any profit it makes
- applies any profits arising from the right of admission to the above cultural activities to the continuance or improvement of the facilities made available by means of the supplies; and
- is managed and administered on a voluntary basis by persons who have no direct or indirect financial interest in its activities.
On 3 December 2003, following the ECJ ruling in the case of The Zoological Society of London (C267/00), Customs announced a change to the third of these conditions advising that from 1 June 2004, an organisation need only be essentially, and not exclusively, managed and administered on a voluntary basis .... in order to meet this condition. This condition will normally be satisfied if a charity has no charity trustees who are being paid, or who are contractually entitled to be paid, more than token remuneration for their services.
As a consequence, some cultural organisations which currently do not qualify as eligible bodies, may soon do so. It is therefore essential for you to review your VAT position as soon as possible. If you intend to amend the charity's constitution in order to ensure that the charity remains an ineligible body, and it is necessary to involve the Charity Commission in this process, then you should approach the Commission as soon as possible.
If, as a result of this change in policy, you now qualify as an eligible body, then with effect from 1 June 2004, you will no longer be allowed to charge VAT on your admission charges and may not be able to reclaim the VAT charged to you on your related expenditure.
Full details of the change and how it may impact upon you can be found in Business Brief 28/03 and Public Notice 701/47 Culture (published December 2003) which are both available on the Customs & Excise website. If you are still in doubt about your particular situation and would like further advice then please contact the Customs & Excise National Advice Service on 0845 010 9000 or the Charity Commission on 0845 300 0218.
Issued by the Charity Commission and HM Customs and Excise May 2004