The CJEU has published its judgment in this UK referral (Case C‑592/15) from the Court of Appeal. This case concerns HMRC’s decision to refuse the British Film Institute’s (BFI) claim for repayment of overpaid VAT accounted for in the period 1990 to 1996 on the sale of tickets for admission to screenings of films.

The Court was asked to rule on the following questions

1. Are the terms of Article 13A(1)(n) of the Sixth Directive, in particular the words “certain cultural services”, sufficiently clear and precise such that Article 13A(1)(n) is of direct effect so as to exempt the supply of those cultural services by bodies governed by public law or other recognised cultural bodies, such as the supplies made by [BFI] in the present case, in the absence of any domestic implementing legislation?
2. Do the terms of Article 13A(1)(n) of the Sixth Directive, in particular the words “certain cultural services”, permit Member States any discretion in their application by means of implementing legislation and, if so, what discretion?
3. Do the same conclusions as above apply to Article 132(1)(n) of [Directive 2006/112]?’

The Court agreed with the AG’s Opinion (see below) that Article 13A(1)(n) of the Sixth Directive, exempting ‘certain cultural services’, must be interpreted as not being of direct effect, so that in the absence of transposition that provision may not be relied on directly by a body governed by public law or other cultural body recognised by the Member State concerned supplying cultural services.

Had the decision been in favour of the charity the implications could have been much wider than just the BFI, or even charities that show films, with wide scope for the boundaries of the definition of “cultural services”. This is a disappointing outcome for the sector as the UK legislation had been overly restrictive and had strange omissions in it that were unfair.

CTG plans to produce a more detailed commentary on the case in due course.

Background

The First Tier Tribunal had held that admission to a cinema or other venue showing films, supplied by an eligible body, was a cultural service for the purpose of the EU VAT Directive (Directive) and that in the absence of domestic implementing legislation during the claim period, the relevant EU provision had direct effect. Consequently BFI’s supplies were exempt from VAT. The Upper Tribunal subsequently upheld this decision and HMRC appealed to the Court of Appeal.

The Court of Appeal referred the case to the CJEU asking whether the cultural services exemption has direct effect, so as to exempt BFI’s supplies in the absence of any domestic implementing legislation. The referral also asks whether any discretion is given to Member States to discriminate between cultural services in their application of the exemption.

An Advocate General’s (AG) opinion indicated that that the Directive must be interpreted as meaning that the concept of ‘the supply of certain cultural services’ leaves it to the Member States to decide which supplies of cultural services may be exempt from VAT. It is for the national court to decide whether the exclusion of certain services from the exemption complies with the principle of fiscal neutrality, in particular whether it infringes the principle of equal treatment in relation to other operators enjoying exemption from VAT. The AG has also opined that as the Directive, in the context of cultural services, provides no detail regarding which activities may be eligible for VAT exemption, allowing Member States broad discretion in that regard, it cannot be given direct effect. Consequently it may not be relied on directly by a taxable person before the national court, where the Member State concerned has failed to transpose that Directive into national law by the end of the period prescribed.

Further information on the VAT cultural services exemption can be found here.