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A client, a self employed actor (UK resident/ordinarily resident and domiciled) who trades as a sole trader and is registered for VAT in the UK, has undertaken a film role, which was shot in New Zealand.
The income for the film was agreed with the New Zealand company as a global fee and this included a buy out of any future residual rights. This was paid — as is often the case on a film — as a weekly fee for the duration of the shoot and was subject to New Zealand withholding tax.
A client, a self employed actor (UK resident/ordinarily resident and domiciled) who trades as a sole trader and is registered for VAT in the UK, has undertaken a film role, which was shot in New Zealand.
The income for the film was agreed with the New Zealand company as a global fee and this included a buy out of any future residual rights. This was paid — as is often the case on a film — as a weekly fee for the duration of the shoot and was subject to New Zealand withholding tax.
Customs are contending that this was a standard-rated supply for VAT under the basic rule and VAT should have been charged. This was news to me as, normally, services supplied outside the EU are treated as outside the scope of VAT when provided to non-EU business customers.
I cannot find any help from VAT Notice 741 and Customs state that the rules relating to services where performed do not apply as this is not a 'live performance'. There is very little on actors in the reference publications that I have and I cannot locate a definitive answer covering this situation. I find it hard to reconcile the logic of charging VAT in this situation. It has occurred to me that the circumstances are similar to someone going to shoot a film in Hollywood and it seems therefore likely that it would have been tested previously.
Customs seem unable to provide anything from a previous examination of this issue and readers' experiences of this problem would be welcome.
Query T16,619 — Equity man.
Reply by John Price
You had me worried for a moment. When I checked my book and found the answer in the chapter on exports of services: that Customs say in Notice 741 that the work in a recording studio is a supply of rights, which is therefore covered by VATA 1994, Sch 5 para 1, I indeed could not find it in the notice!
Yet, as one would normally suppose for an actor, your client did not just do a job at a daily rate; such contracts cover the copyright of the resulting film: a para 1 supply.
Fortunately, I know how to search a notice. On the HMRC site, VAT section, go to Public Notices via Library (takes about three clicks!) and pick the notice you want. Wait for it to load fully and the download box to appear on the right-hand side. Open (or save it if you want to keep it on your computer) the PDF version — rather slow with 741, it being a big notice.
Then, use the PDF search facility to look for individual words — something ineffective on the website itself, since it merely says a notice contains a word, not where it is.
Unfortunately, 'recording' is there but no longer in reference to a studio or an actor. However 'rights' does bring up in paragraph 12.2.2 a reference to the assignment by a performer for a performance to be exploited.
So, there you are! Customs should back off gracefully.
Incidentally, your statement that services are outside the scope to non EU business customers is wrong. Perhaps that is a typo and you realise that the limit to business ones is only those in the EU.
