Selwyn Stein, managing director of tax reclaim and compliance specialist VAT IT argues that it has never been more important for events operators to explore clawing back lost revenue from Value Added Tax.
The dual issues of Brexit and Covid-19 have hit many sectors of the UK economy harshly, but none has felt the impact quite so much as the hospitality industry, specifically, outdoor events and concerts. With the easing of travel restrictions and the opening up of business on the horizon, the industry is starting to prepare for a return to the new normal. As people may still be uncomfortable to go to indoor events, and with government guidelines being quite fluid, there promises to be an increase in outdoor events to compensate and cater for the growing, pent-up demand to have fun, see friends and attend live outdoor events. The effect of all this will of course be an increase in support staff, infrastructure and services required. There promises to be a lot of activity over the second half of 2021 into 2022.
With so much lost business over the last 12 months, event organisers are quite rightly concerned about finding ways to claw back lost revenue and there is an area that they may be overlooking – Value-Added-Tax reclaim.
Everyone thinks of VAT as that costly outlay which businesses pay and struggle to ever get back. However, there is a significant opportunity for the events industry to reclaim VAT on expenses both here in the UK and when bringing equipment over from the EU and utilising services. Given the expected increase in the number of events, organisers may want to consider buying and not renting equipment to maximise the value they get from use. There are import and VAT considerations when doing this, and with the UK now out of the EU, it’s imperative to make sure that Import VAT and other regulatory requirements don’t delay arrival or increase costs.
But if you are not buying then renting equipment such as lighting, stage and sound could still carry VAT charges. Other expenses could be bringing over artists and celebrities from outside the UK – services that also attract VAT and, without careful attention to how contracts are structured, this VAT could be lost. Even the costs of organising special VISA’s, under the new post-Brexit requirements, could be an opportunity for VAT recovery. Organisers often sub-contract to different providers across the UK and in Europe and marketing and advertising expenses could be charged in different countries where different agencies are used. Often it’s often the smaller work that gets done where businesses miss out on the extra hidden costs. With EU VAT rates of up to 27%, this could cause considerable loss of cash. It’s not only the organisers that can benefit, but also attendees. This lowers the costs for them which ultimately means more money to spend, a welcome boon to the industry.
With VAT rates in the UK of up to 20%, meaning 20p for every £1 spent often being left on the table, and budgets now under pressure, having reliable experts to assist in reclaiming the VAT should be an obvious consideration. And you can reclaim this local VAT spend for the past four years. It’s often those small slips and invoices as well that organisers and their staff forget to keep which represents another lost opportunity in VAT recovery. Oddly enough, 30% of all invoices issued by suppliers are not even in the correct format for VAT reclaim, meaning even when trying to reclaim the VAT there are problems.
The entire ‘supply chain’ of hosting and staging an event to organising the talent, setting up the facilities and offering attendee packages has VAT charged on each leg. Whether its large invoices to be paid, locally or in the EU, or the organisers themselves traveling about to scout venues, meet with suppliers or take on foreign travel; these are all avenues for VAT reclaim. Ultimately event organisers should make sure they know the where the potential VAT savings are and ensure correct documents are kept so that they can recoup this value and not confronted with larger cash outlays than necessary.