The standard rate of VAT was reduced from 1 December 2008 from 17.5% to 15%. HMRC have published some further frequently asked questions which clarify the correct treatment in several situations.
One situation which helps to explain the complexity of the issue is as follows:
'Treatment of tickets to events (theatre, football season tickets etc):
1. I am a concert promoter. I do not issue VAT invoices but received payment in October 2008 for a concert that will take place in April 2009. Can I adjust the VAT?
The short answer is no. The special rules for supplies spanning the change in the VAT rate apply where payment is received (or a VAT invoice is issued) before 1 December 2008 where the goods are to be supplied or services performed on or after that date.
In the case of tickets to a concert (or theatrical performance etc) what you are selling is the right to attend a particular event. As in this instance the right to the event was granted in October 2008, the supply does not span the change in the rate and VAT of 17.5% should be accounted for.
The same principle applies to football season tickets. If these were bought and paid for prior to 1 December 2008 they are subject to the 17.5% VAT rate with no scope for adjustment
Update 22 January 2009
Since the above guidance was published on 12 December 2008 it has become clear that a number of businesses were not aware of HMRC’s view of the correct VAT treatment of tickets to events. Some have assumed that where a ticket was sold prior to 1 December 2008 for an event due to take place on or after that date that the 15% rate should apply.
Where a business has mistakenly refunded its customers the difference between the 17.5% VAT originally charged on ticket sales and the 15% rate HMRC will operate a light touch and will not seek to recover the VAT that has been refunded. This treatment applies to refunds that were made up to the date of the publication of this update.'
Note that HMRC will apply a ‘light touch’ where businesses have incorrectly applied the rules up until the issue of the update on 21 January 2009.
As this particular situation illustrates, the change in the VAT rate is causing widespread confusion. If you have any concerns please do get in touch.
Source: HMRC VAT rate guidance
