Value Added Tax (VAT) is a tax on the supply of goods and services in the UK and the rest of the European Union. It is charged as a percentage of the price of the goods or services being supplied. The standard rate of VAT in the UK is currently 20%.
VAT rates
There are three main rates of VAT in the UK:
- Standard rate – 20%
- Reduced rate – 5%
- Zero rate – 0%
The type of goods or services being supplied determines which VAT rate is applicable. Some goods and services are exempt from VAT altogether.
VAT on events
The VAT treatment of events in the UK depends on the nature of the event and who is organizing it. Here are some of the key factors:
- If the event involves the admission of attendees and the provision of entertainment, it is likely to be subject to the standard 20% VAT rate. This covers events like concerts, theatrical performances, sporting events, exhibitions, conferences, seminars and festivals.
- If the event is run by a charity or not-for-profit body and is in furtherance of the organization’s charitable objectives, it may qualify for a reduced 5% VAT rate. The charity must be registered with HMRC.
- Education events may be eligible for VAT exemption if certain conditions are met around accreditation, public funding and content.
- Business events like conferences and seminars arranged for staff training purposes can be zero-rated for VAT if attendees are charged directly or through their employer.
So in summary, most public-facing entertainment, leisure and networking events will attract the standard 20% VAT rate. But there are some circumstances where a lower VAT rate may apply.
VAT registration threshold
Organizations that put on taxable events in the UK only need to register for VAT and account for it if their taxable annual turnover exceeds the VAT registration threshold. This threshold is currently set at £85,000.
Below this turnover level, organizations can voluntarily register for VAT if they wish. But there is no legal obligation to charge and account for VAT if the registration threshold is not exceeded.
How VAT is charged on event tickets
For events that are subject to VAT at 20%, the tax will be included in the overall ticket price paid by attendees. It is not usually shown separately.
The event organizer calculates VAT based on the net value of the ticket, excluding any VAT. For example:
- Ticket price including VAT – £100
- Net price excluding VAT – £100 / 1.2 = £83.33
- VAT charged at 20% – 20% of £83.33 = £16.67
The organizer adds VAT to the net ticket price to determine the gross price paid by the attendee. The VAT collected is then paid over to HMRC.
Exceptions for VAT on tickets
There are some cases where VAT may not need to be charged on event tickets:
- If the ticket price is £12 or less, VAT is not applicable
- Zero-rated tickets for eligible business events
- Tickets for events run by qualifying charities or not-for-profit bodies
Exemptions may also apply in certain situations. Professional tax advice should be sought if there is any uncertainty around VAT on specific events.
Other event services subject to VAT
As well as admission tickets, VAT will also be charged on any other taxable goods and services supplied at or around the event. Examples include:
- Catering and food/drink sales
- Merchandise sold at the event
- Accommodation and transport provided as part of a package
- Equipment hire and production services
- Sponsorship and advertising packages
The correct VAT treatment should be applied to all these associated event services.
Recovering VAT on event expenses
If an event organizer is VAT registered, it can recover VAT paid out on expenses related to staging the event. This includes items like:
- Venue and equipment hire
- Catering, security and cleaning services
- Advertising and marketing costs
- Employee expenses
The VAT reclaimed on expenses is offset against the VAT collected on ticket and merchandise sales when accounting to HMRC.
VAT record keeping
Meticulous VAT records must be kept for all events. This includes:
- Invoices for all supplies made and expenses incurred
- Ticket sales records and merchandise accounts
- VAT account showing total VAT collected and reclaimed
These records must be kept for a minimum of 6 years in case of a VAT inspection by HMRC.
Penalties for VAT errors
Stringent penalties apply if errors are made in accounting for VAT on events. Potential penalties include:
- Default surcharge penalties for late VAT returns/payments
- Penalties for substantial errors in VAT returns
- Penalties for repeated errors
- Fines and prosecution for deliberate VAT evasion
Professional advice should be sought if there are any doubts over VAT to avoid costly penalties.
Conclusion
Application of the correct VAT rate is crucial for events in the UK. Most public events will face the standard 20% VAT rate on ticket sales. But there are cases where VAT could be reduced, zero-rated or exempt.
Meticulous VAT records must be kept and returns completed accurately and on time. With good compliance and advice where needed, the process of accounting for VAT on events should run smoothly.