David Chismon looks at the tax rules for outdoor events

Are you looking to earn a lucrative additional income from summer events? In this article, David Chismon, Partner at Saffery, provides some useful tips.

For property-based businesses, making sites available for summer events can be a lucrative source of additional income. But there are a number of potential tax pitfalls to beware of.

The types and scale of summer events hosted by landowners are wide-ranging – events such as outdoor cinema screenings are proving to be popular.

Other ventures include musical, cultural, and sporting events from large festivals taking place over a number of days, to the smaller ‘pop-up’ events, which are available to attend for a limited period in one day.

Income might include that generated from admission tickets to car parking and camping and might be based on numerous other variable elements.

There is a misconception that complexities and risks only arise with larger major events, but even those putting on something much less extravagant, with only a handful of people attending, need to consider how that might affect their tax liabilities, and the implications the event might have. For example, there can be consequences for both inheritance tax and VAT, and not taking these into account at the time could prove to be very costly in the future.

Careful consideration should be given to ensure that certain criteria are met so that the tax position of the individual who owns the land can either be maintained or at least not jeopardised. The key to this often means running the event themselves, or entering into a joint venture with the organiser.

It is sensible to ensure the relevant tax issues are being addressed by considering the following questions, before entering into any agreement for an event to take place on your land or site:

• What is the landowner’s involvement – is it purely rent received for the use of the land by a third party?
• Should VAT be charged on that use?
• Will VAT be recoverable on any related costs incurred with the event?
• How will income be taxed in the hands of the landowner?
• Does the occupation of the land for an event (such as a festival) have an impact on IHT reliefs, such as Business Property Relief (BPR) or if farmland, Agricultural Property Relief (APR)?

For VAT, the major consideration is whether VAT is due on any rents or licence fees received. This is not just a case of whether the land has been opted to tax by the landowner, or the party which is the beneficiary of the income.

Even when the land or site is not opted to tax, such income is still subject to VAT where the licence being granted, or the pitch hire, goes beyond a passive licence to occupy.

Any additional service or support provided will often mean the income received is subject to VAT and not VAT exempt. Admission tickets, granting facilities for car parking and also the provision of camping pitches are all supplies subject to VAT.

Arrangements regarding certain types of event can be complex, with the site owner for example often acting as an agent for owners of artwork who are exhibiting their pieces for sale during an event such as an art fair.

The site owner may take payment from attendees purchasing those pieces and receive a commission for doing so. The site owner would then need to be mindful of the value of its supply as agent, to ensure the correct VAT accounting.

From an IHT perspective it is usually beneficial for the landowner to operate the business themselves especially in relation to BPR.

Where land or property is let, the starting point is that it is unlikely to qualify for BPR unless it is part of a wider business, and the majority of the combined business is regarded as trading.

As BPR can ensure valuable property is not exposed to IHT it is a relief that is worth ensuring is not jeopardised and specific advice should be taken.

The IHT rules are complex but as the rate of tax is 40% on the value of property, it is definitely worth ensuring, if at all possible, that any IHT relief you think you qualify for is not at risk.

For any farmers who are relying on APR, this relief requires the land to be used for the purposes of agriculture. There is therefore a risk if land is used for another purpose and so understanding the impact of this is important.

It is vital to go into any business venture understanding all the pros and cons of not only the commercial and legal aspects, but also the tax position as well and seeking specialist advice if there are any doubts can be very worthwhile.

For further information on the tax and VAT impacts of running outdoor events on your land, please get in touch with David Chismon.