The increase in consumer demand for virtual conferences, streamed performances and remote training since the start of the pandemic in 2020 has created all sorts of challenges for many organisations, including applying the correct VAT treatment for the provision of these services.

At the beginning, in October 2023 HMRC successfully challenged the the assumption that selling the same event to a remote audience, rather than a live audience, does not impact the applicable VAT rate.

The live-stream service was different from that consumed by in-person attendees

In Derby Quad vs HMRC, the First Tier Tribunal (FTT) ruled that the VAT exemption applies only to the tickets sold to individuals attending the theatre in person.

The First Tier Tribunal said that the remote audience is not receiving the same theatrical performance as in-person attendees as the nature of services provided during the live stream is different.

For these reasons, the tribunal argued that the nature of the services provided during live streams was different from those provided to in-person attendees. Therefore, the supply to a remote audience could not be classified as a theatrical performance for VAT purposes. Consequently, Derby Quad should have charged 20% VAT to its virtual customers.

Wider Impact

The divergence in VAT treatment between in-person contrast remote events may not be limited to those organised by the cultural bodies.

For example, gyms. The UK VAT rules on sports activities say that when fitness classes are provided on a non-profit basis, gym members are not charged VAT. However, what if the fees paid by members are attributed to attending remote classes?

Only the funeral. burial and cremation industry has been given absolute clarity by HMRC

A broad interpretation of the FTT’s ruling in the Derby Quad case may suggest that VAT becomes chargeable if it can be argued that live-streamed gym classes have substantially different features compared to those attending in a gym studio.

At the moment only one sector of the UK economy has been given absolute clarity by HMRC on the correct treatment to apply to live-streaming events - the funeral, burial, and cremation industry. Revenue and Customs Brief 1 (2024) states that all undertakers, cemeteries, or crematorium operations supplying live web stream of their funeral services should be exempt from VAT.

If these services have been VAT charged incorrectly in the past, they are guided to to review their position and refer to HMRC’s Notice 700/45 on how to revise VAT errors and make adjustments or claims.

EU interaction

Meanwhile, starting next year, providing remote live services may have significant VAT implications for UK businesses with consumer customers in the European Union. Beginning 1 January 2025, the EU rules on the place of supply for online services, such as live distance learning courses provided for a fee, will undergo significant changes.

Currently, both in the UK and the EU, the place-of-supply rules for business-to-consumer (B2C) services state that these live events, such as webinars or conferences, are taxable where the supplier is located. Therefore, a UK provider must charge UK VAT to both domestic and overseas consumers, unless a VAT exemption applies for certain educational training.

There is a concrete risk of double or multiple taxation

However, starting from January 2025, the place of supply of services to European customers not in business will move from where the supplier belongs to the member state where the consumer resides. Consequently, the UK provider may be required to charge both UK VAT according to the UK rules and the VAT of the member states concerned. This change poses a significant risk of double or multiple taxation.

The reverse scenario is also possible: an EU-based training provider selling remote live courses to UK customers might not charge any VAT. Since the provider is not established in the UK, UK VAT would not apply, and its supplies would be considered outside the scope of EU VAT.

However, the UK government—regardless of which party is in power—may choose to adopt and implement the new EU place-of-supply rules starting January next year, thereby mitigating any double taxation risks for British-based businesses.

Contact us to find out more about VAT.