As the nation awaits the next season of Downton Abbey, Saffery Champness is warning that farming estates and country houses which feature in TV series, adverts or any commercial filming should be aware of changes in HMRC's approach to VAT charges on payments made by production companies using their grounds.
The firm says that traditionally, granting access to land or property for filming was treated as a right over land and therefore no VAT was chargeable unless the volume of additional services provided was such that the right over land was then ancillary, or that apportionment was a legitimate alternative.
However, following the ruling last year in the case of Harewood Estate, Saffery Champness says estates and country houses should now normally be charging VAT for film income. This is despite the fact that location agreements can vary greatly in terms of the provision of service such as electricity, toilets, parking, and accommodation. Many owners may also have existing rulings from HMRC stating that film income from films is exempt, but the firm says even such exemptions can be overturned.
Mike Harrison, partner at Saffery Champness, said: 'It would appear that the HMRC view on film income is now very similar to that which they have adopted on weddings, the default position being that in reality there is no exempt supply of land at all.
On these grounds alone we would advise owners, it they are not already doing so, to charge VAT where that is commercially achievable. It should also be remembered that it can often be difficult to collect VAT after the event, since production companies can be single-film vehicles. In cases where an owner believes exemption remains appropriate they should obtain a fresh ruling from HMRC to be sure of their position in those particular circumstances,' Harrison said.