Dealers standing at fairs across the UK will soon face a 20% rise in stall rents as HM Revenue & Customs enforce new VAT rules.
The change has arisen following discussions
at European level aimed at reducing the charging of cross-border
VAT. The move was welcomed by the trade until HMRC applied this new
interpretation to it.
Rental of pitches at fairs has been exempt
from VAT until now. However, HMRC argue that any add-on service,
such as promoting the fair or providing power or security, that
does attract a VAT charge is indivisible from the pitch rent, which
means VAT must be charged on the whole deal.
Keith Harris, chairman of International
Antiques and Collectors Fairs Ltd (IACF), who rent out over 30,000
pitches a year at Newark, Ardingly, Shepton Mallet, Swinderby and
Newbury, is so concerned at the threat that he has decided to fund
a major legal challenge to the changes.
A recent survey at Shepton Mallet indicated
that close to 90% of stallholders, many of whom work to very narrow
profit margins, were not VAT-registered, meaning they could not
reclaim the extra 20% charge.
Threat to Trade
Mr Harris first became aware of the threat
when HMRC ordered Nelson Events to charge VAT on pitch rents
following a VAT inspection. Nelson are also funding the
"I was shocked at the twist HMRC put on what
was supposed to be a helpful change for normal business-to-business
trade shows," Mr Harris told ATG.
"You can't have an exhibition without
promoting it or putting security on the door."
What adds to the frustration with the
changes is that car boot sales and markets, which also supply
add-on services, are exempt. When it comes to antiques fairs,
however, it appears that the organisers' ability to attract a
select group of buyers, such as collectors, is what distinguishes
them and reinforces the service package idea. However, singling out
antiques fairs on this basis does not even appear to follow HMRC's
interpretation of the rules.
"This is highly contentious," says VAT
expert advisor Mike Thexton. "Any rental of a pitch - or a shop -
is the supply of an opportunity to sell. Why else would the trader
pay for it?
"The fundamental supply is still, in many
cases, effectively a chalk mark on the ground, and in European law
(which is paramount for VAT) that is exempt."
He believes that IACF and Nelson Fairs have
a strong case, "but it will take time and money, neither of which
they will get back. And if they lose... they will have to look very
closely at the pricing of stand space at their fairs".
Mr Harris, who is calling on other organisers to join the
campaign, said: "IACF are going to fight this tooth and nail on
behalf of the industry. If we lose it will have a profound effect
on the trade."
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