HMRC is continuing its campaign concerning the VAT treatment of filming rights.

Background

HMRC is contacting local authorities about the fees charged for filming rights.

HMRC’s view is that where filming takes place in a defined area or space open to the general public, the Council is not granting an interest in, a right over, or a licence to occupy land but instead using the property for a different purpose than for which it was intended, namely for public enjoyment. Therefore, the entire supply is subject to VAT at the standard rate.

This standard rating has also been applied to areas that, if not for filming, would usually be non-business, such as a highway closure by a Highway Authority.

Similarly, HMRC insists on amalgamating exempt and non-business supplies into a single taxable supply, just because of the mere mention of filming.

There are many interesting arguments HMRC is deploying to support its position. We do not understand all of them. However, the three main arguments, as we understand them are:

1. Councils are not granting exclusivity over a site. An example of this is when a council grants a licence to a company to occupy part of a public park for filming. HMRC argued that the council was legally obliged to allow the public access to the park. Therefore, the company could not be granted exclusivity (i.e. the public still had a right to access the site).
2. Film companies are hiring the site for its facilities, and the occupation of the land is an incidental purpose. One of HMRC’s arguments we’ve encountered is that if the site had a view of some historic buildings it must be a supply of facilities.
3. When a council lets some land, significant additional facilities are supplied with the land; therefore, it cannot be a “passive occupation”.

The first point is wrong as a matter of law because specific legislation allows councils to close part of a park to the public for various purposes. Additionally, VAT case law is clear that the exclusivity test (for VAT exemption for a licence to occupy land) is still met if other parties have legal or contractual access to the land.

We’re not sure what to say about the second argument apart from that it is wrong. (If it were correct, any supply of land with a decent view could not be VAT-exempt.)

The third argument might be correct, but it must be assessed case-by-case.

The HMRC Officer responsible for the campaign had previously agreed that whilst  HMRC would still issue assessments for alleged VAT liabilities, that HMRC would hold collecting any repayments until after the CIPFA VAT Committee met in November 2024.

Following the CIPFA VAT Committee meeting, HMRC has continued to uphold its stance on standard rating any form of filming rights for the time being. The matter had only been considered by the HMRC Land and Properties Policy Team but not yet by the Public Bodies Policy Team.

As a result, the CIPFA VAT Committee will contact the policy group directly and the issue will be taken to the Land and Property Liaison Group.

While this plays out, councils will continue to be approached to grant filming rights.

Our advice is to review each request individually to determine what is being provided. Do not apply a blanket approach, as we believe that most filming rights will either be non-business or exempt. However, some will be subject to VAT at the standard rate.

We recommend keeping evidence of your decision in case it is questioned by HMRC in the future.

If you haven’t already done so, we also suggest that you review any filming rights granted within the last four years to determine whether any retrospective output VAT needs to be accounted for.

However, please keep in mind that just because one agreement is considered taxable, it doesn’t automatically require an adjustment for all other agreements, as each one will need to be assessed on the precise details.

If your council supplies filming rights and is challenged by HMRC, or you would like assistance reviewing past or present contracts, please get in touch.

Contact the team