This UK referral concerns the liability of the British Film Institute’s (BFI) cinema admissions. The dispute covers the period from January 1990 to May 1996. This is the period from 1990 when Member States were no longer allowed to tax cultural services, until the time when the UK implemented the EU exemption into the UK legislation in 1996. BFI, a public body, argued that it could rely on Article 13A(1)(n) of the Sixth Directive (now Article 132(1)(n) of the VAT Directive). The First-tier Tribunal and Upper Tribunal supported the taxpayer’s arguments that Article 13A(1)(n) had direct effect and the taxpayer could use this to support its argument that such cinema admissions were exempt. The Court of Appeal referred the issue to the Court of Justice of the European Union (CJEU). The Advocate General (AG) considers that the cultural services exemption gives Member States discretion as to which cultural services to apply the services to.
Article 13A(1)(n) of the Sixth Directive requires Member States to exempt:
‘certain cultural services and goods closely linked thereto supplied by bodies governed by public law or by other cultural bodies recognised by the Member State concerned’:
Certain cultural services
The AG noted the history of the exemption and attempts to agree an exhaustive list of services. The AG was of the view that the use of the word ‘certain’ instead of ‘all’ had the intention of exempting some cultural services but not all. The AG added that such discretion given to Member States is consistent with differences in traditions and regional heritage across the EU. The AG did add that where national legislation decides which services are exempt, the principle of fiscal neutrality prevents services which are in competition from being treated unequally.
Governed by public law
Whilst noting that being a public body or a body recognised by the Member State is a condition for the exemption, the AG disagreed with the taxpayer’s argument that the exemption depends solely on the nature of the body supplying the services. The AG opined that it also requires the supply to be recognised as exempt by the Member State. Cinema admissions have not been recognised by the UK.
Direct effect of Article 13A(1)(n)
In the absence of UK legislation in the period, the referral also sought guidance on direct effect. The AG noted settled case law that has established that, where the provisions of a Directive appear sufficiently precise, they may be relied on. However, given the discretion given to Member States and the lack of precision, the AG concluded that this part of the Directive cannot be relied upon by a taxable person.
The AG is of the opinion that there was a deliberate intention to give Member States a discretion around which services the exemption could apply to. With regards direct effect, that argument fails because of the lack of precision and clarity of the exemption. It is not disputed that the UK has the right to apply conditions that the supplier must meet for exemption to apply to a cultural service and the major cinema chains are not non-profit making bodies so cannot meet the UK conditions. However, if all cultural services supplied by eligible bodies should be exempt then this case has wider implications than just for cinemas, though not if the CJEU supports the AG’s Opinion.
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