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 campaign.
"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."