Theatre owes 21% VAT on interval drinks included in the ticket price

The District Court of Zeeland-West-Brabant held that an alcoholic interval drink included in the ticket price is not ancillary to admission to the theatre. We have doubts about that ruling.

Where a business makes several supplies for consideration to the same customer, the VAT consequences must in principle be determined separately for each. There is an exception to that splitting rule: what is economically a single supply must not be artificially split for VAT purposes.

That exception applies where one or more elements form the principal supply from the average customer's perspective and other elements are ancillary and follow its tax treatment. It also applies where different supplies or elements are so closely linked that objectively they form a single indivisible economic supply.

When is a supply ancillary?

A supply is ancillary where for the average customer it is not an end in itself but a means of better enjoying the principal supply. That question matters above all where one of the supplies attracts an exemption or a reduced rate.

Take parking (21%) at a zoo or theme park (9%). If the parking were ancillary to admission, only 9% VAT would be due on the parking income. In recent years, however, the Supreme Court has made clear that parking charged for separately is not ancillary and is therefore subject to 21%.

The ruling

The District Court of Zeeland-West-Brabant ruled on admission to a theatre (9%) where an interval drink (21% if alcoholic) was included in the ticket price. Is that drink ancillary to admission, and therefore also taxed at 9%?

The court held that it is not. One factor may have been that the theatre charged local associations a separate fee of € 3.50 for the cloakroom, interval drink and booking costs, and stated that amount on the tickets even where those elements were included in the price.

Our doubts

We have doubts about whether that ruling is correct. Where the interval drink is included in the price, the customer has no choice. To that extent the situation differs from the parking cases, where parking was not included in the admission price.

It is also hard to imagine that for the average theatregoer the interval drink is an end in itself. In our view the theatre would do well to challenge the decision on appeal.