Running an events business? Whether you’re planning corporate conferences or dream weddings, understanding the financial nitty-gritty is crucial. Let’s break down the key things you need to know on the events industry VAT & accounting quirks you need to know when it comes to the events industry finances.
VAT In the Events Industry: It’s Complicated
For event management companies the standard 20% VAT rule on sales for services to customers in the UK, regardless of whether they’re commercial or direct to consumer, but here are some quirks to the rules and things to be aware of:
Events Management & Sponsorship
Place of Supply for Events Services would typically be where the customer belongs. If an event is held in the UK and you are supplying a customer with planning, events management or charging them for sponsorship of an event then the VAT treatment is determined by where your Customer belongs.
- If your customer is outside the UK but based in EU, then your sale will be Zero Rated EC Services
- If your customer is outside of the EU, such as USA, UAE, then your sale is out of the scope
You can still claim input VAT in the UK even if your customer is not being charged VAT.
Admission to Events
If the sale is for admission to an event or related to admission, such as cloakroom facility charges then the VAT is based on where the event is held. This could be ticket sales to an event or performance.
- Standard VAT treatment on tickets/admission to UK based events
- No VAT on events held outside of the UK
What about passing on our non-vatable costs to Customers?
If the events company is incurring costs which they are recharging the customer as part of the service or including a profit margin, these are deemed to be recharges and VAT should be charged, even if there is not VAT on the costs.
Should the cost be determined to be a ‘disbursement’ then this would be out of the scope of VAT. For a cost to be a disbursement, it would need to be a cost that is borne to the customer that the event company pays on behalf and recovers from the client but does not make a profit.
There are distinct rules on the differences between charges and disbursements.
When to Account for the VAT on Sales
- For deposits received, the tax point would be based on the date of the payment receipt
- Cancellation fees would also be subject to VAT
- Compensation for damages – would usually be outside the scope of VAT
What about Input VAT on the Event Costs?
A VAT registered business in the events industry can claim input VAT on costs assiciated with the event as part of its trade but not if the event is for the purpose of entertaining it’s own clients.
For most regular businesses, costs associated with hosting an event would be deemed ‘entertaining’ and costs then disallowed for VAT. However, in the Events Industry, food & drink for refreshment may be ancilliary to the trade of organising the event, as long as this is deemed to be reasonable, the input VAT may be claimed.
Any other supplies for which input VAT is charged, that is wholly and exclusively for the purpose of the business may be claimed back, even if the customer isn’t being charged VAT.
Events Industry Accounting Quirks
There are some quirks that impact the events industry when it comes to their accounting.
Cash flow management – this can be challenging for events businesses who see seasonal fluctuations, receive deposits in advance of events and have to bear costs in advance of receiving their sales.
Event profit management – its not always straight forward to track income or costs per event. We recommend using tracking categories in Xero or class tracking in Quickbooks.
Revenue recognition – revenue should be recognised based on the when the event has been held or supply has been made, not necessarily when the invoice has been raised or income received. This usually means management accounting and end of year accounting involves a lot of adjustments to defer income.
Creative Industry Tax Reliefs – there are corporation tax reliefs available for creative events companies who organise productions, exhibitions, concerts if certain criteria is met.
Expert Help from Brisan
At Brisan, we’ve worked with plenty of events companies, including party planners, wedding suppliers, corporate events, events management companies and production companies. Our team can help you understand the quirks that impact your events company.
🎯 Ready to get your events business finances in order? Contact us or Book in for 15 Minutes Free Advice.
