Tax expert Dermot O'Brien presents at The Business of Fun 2011

1. AOIFE Conference 2012AOIFE Conference 2012
Tax Issues for Events’ and Festivals’Tax Issues for Events’ and Festivals’
OrganisersOrganisers
Dermot O’BrienDermot O’Brien
Dermot O’Brien & AssociatesDermot O’Brien & Associates
November 2012November 2012

2. Typical Structure of OrganisationsTypical Structure of Organisations
Usually non-profit makingUsually non-profit making
• Profits not distributed to MembersProfits not distributed to Members
Recipients of State subventionRecipients of State subvention
Tax charitable statusTax charitable status
Often have significant voluntary inputOften have significant voluntary input

3. Tax HeadsTax Heads
Income Tax and Corporation Tax rarely anIncome Tax and Corporation Tax rarely an
issueissue
Likewise the Capital TaxesLikewise the Capital Taxes
VAT and Payroll Taxes the key tax headsVAT and Payroll Taxes the key tax heads
• Focus of most Revenue Audit queriesFocus of most Revenue Audit queries
Increasingly aggressive approach fromIncreasingly aggressive approach from
Revenue in current difficult environmentRevenue in current difficult environment

4. Payroll TaxesPayroll Taxes
PAYE, PRSI, LeviesPAYE, PRSI, Levies
Critical Issue:Critical Issue:
• Employed versus Self-employed
Position clear for permanent staffPosition clear for permanent staff
• Includes permanent, some temporary, part-timeIncludes permanent, some temporary, part-time

5. Payroll TaxesPayroll Taxes
Position less clear for short-term contractsPosition less clear for short-term contracts
• Performers, designers, directors, etc.Performers, designers, directors, etc.
Revenue published guidelinesRevenue published guidelines
• Criteria whether person is an employee:Criteria whether person is an employee:
• Another directs how, when, where work is doneAnother directs how, when, where work is done
• Only labour suppliedOnly labour supplied
• Paid fixed hourly/weekly/monthly wagePaid fixed hourly/weekly/monthly wage
• Work cannot be subcontractedWork cannot be subcontracted
• Does not supply materials for the jobDoes not supply materials for the job

6. Payroll TaxesPayroll Taxes
Person an Employee?Person an Employee?
• Revenue guidelines – criteria (cont’d.):Revenue guidelines – criteria (cont’d.):
• Not exposed to financial riskNot exposed to financial risk
• No responsibility for investment in the businessNo responsibility for investment in the business
• Works set or fixed hours per week or monthWorks set or fixed hours per week or month
• Works for one person or businessWorks for one person or business
• Receives expenses to cover travel/subsistenceReceives expenses to cover travel/subsistence
• Is entitled to extra pay or time in lieu of overtimeIs entitled to extra pay or time in lieu of overtime

7. Payroll TaxesPayroll Taxes
Person Self-employed?Person Self-employed?
• Revenue guidelines – criteria:Revenue guidelines – criteria:
• Owns his/her businessOwns his/her business
• Is exposed to financial risk for faulty workIs exposed to financial risk for faulty work
• Has responsibility for investment in businessHas responsibility for investment in business
• Can profit from sound managementCan profit from sound management
• Controls how, where, when, what is doneControls how, where, when, what is done
• Can hire others on his/her termsCan hire others on his/her terms
• Can supply similar services to more than one businessCan supply similar services to more than one business
or person at the same timeor person at the same time

8. Payroll TaxesPayroll Taxes
Person Self-employed?Person Self-employed?
• Revenue guidelines – criteria (cont’d):Revenue guidelines – criteria (cont’d):
• Provides materialsProvides materials
• Provides equipment & machineryProvides equipment & machinery
• Costs and agrees price for jobCosts and agrees price for job
• Provides own insurance cover, e.g. public liabilityProvides own insurance cover, e.g. public liability
• Controls hours of workControls hours of work

9. Payroll TaxesPayroll Taxes
Criteria for employed/self-employedCriteria for employed/self-employed
• No one criterion decisiveNo one criterion decisive
• ““Smell Test”Smell Test”
• Usually reasonably clearUsually reasonably clear
• Revenue seeking to move more people to employee statusRevenue seeking to move more people to employee status
• Disadvantage = employer’s PRSI = 10.75%Disadvantage = employer’s PRSI = 10.75%
• Advantage = no VAT (possible saving of 21%)Advantage = no VAT (possible saving of 21%)
• Complication = consider BIK’sComplication = consider BIK’s

10. VAT IssuesVAT Issues
Fundamental Principle:Fundamental Principle:
• EventEvent Income taxableIncome taxable VAT on costs recoverableVAT on costs recoverable
• EventEvent Income exemptIncome exempt  VAT on costs irrecoverableVAT on costs irrecoverable

11. VAT IssuesVAT Issues
Issues for FestivalsIssues for Festivals
• No admission chargeNo admission charge
• Identifying taxable income to which input VAT relates canIdentifying taxable income to which input VAT relates can
be a challengebe a challenge
• Sponsorship?Sponsorship?
• Advertising?Advertising?
• Branding and Promotion?Branding and Promotion?

12. VAT IssuesVAT Issues
Issues for EventsIssues for Events
• Promotion of, and admissions to, live musical andPromotion of, and admissions to, live musical and
theatrical events VAT-exempttheatrical events VAT-exempt
• But taxable if facilities available to consume food and drinkBut taxable if facilities available to consume food and drink
during the performanceduring the performance
• Rate is currently 9%Rate is currently 9%
• A venue could have both taxable and exempt eventsA venue could have both taxable and exempt events
• Each event considered on its own meritsEach event considered on its own merits

13. VAT IssuesVAT Issues
Deductible VAT for Event PromotersDeductible VAT for Event Promoters
• May deduct VAT on all costs associated with taxableMay deduct VAT on all costs associated with taxable
eventsevents
• May deduct a proportion of VAT on costs incurred for bothMay deduct a proportion of VAT on costs incurred for both
taxable and exempt eventstaxable and exempt events
• No VAT deduction on costs attributable to exempt eventsNo VAT deduction on costs attributable to exempt events
• Key issue for recovery of VAT on capital expenditureKey issue for recovery of VAT on capital expenditure

14. VAT IssuesVAT Issues
Event Promoters – self-accounting issuesEvent Promoters – self-accounting issues
• Irish VAT payable on goods brought in from other EU MSIrish VAT payable on goods brought in from other EU MS
(e.g. stage sets, etc)(e.g. stage sets, etc)
• Irish VAT payable on fees paid to overseas (EU as well asIrish VAT payable on fees paid to overseas (EU as well as
non-EU) service providersnon-EU) service providers
• Artists/performersArtists/performers
• Designers/producers/directorsDesigners/producers/directors
• Royalties to authors/composers/playwrightsRoyalties to authors/composers/playwrights
• Lawyers and other professionalsLawyers and other professionals
• AdvertisingAdvertising

15. VAT IssuesVAT Issues
Event promoters – self-accountingEvent promoters – self-accounting
• Self-accounted VAT is deductible where it is incurred inSelf-accounted VAT is deductible where it is incurred in
connection with taxable eventconnection with taxable event
Example 1:Example 1:
• Opera promoter pays €20,000 to Italian tenor to perform inOpera promoter pays €20,000 to Italian tenor to perform in
Ireland. Tickets to opera VAT exempt. Promoter paysIreland. Tickets to opera VAT exempt. Promoter pays
€4,200 to Revenue.€4,200 to Revenue.

16. VAT IssuesVAT Issues
Example 2:Example 2:
• The promoters of an arts festival pay €10,000 to a UKThe promoters of an arts festival pay €10,000 to a UK
comedian to do a stand-up gig in a local venue. Patronscomedian to do a stand-up gig in a local venue. Patrons
can buy and consume drink during the performance.can buy and consume drink during the performance.
Tickets to the gig are liable to VAT at 9%.Tickets to the gig are liable to VAT at 9%.
The promoters must pay €2,100 VAT on the comedian’sThe promoters must pay €2,100 VAT on the comedian’s
fee to the Irish Revenue. Because the gig is a taxable gig,fee to the Irish Revenue. Because the gig is a taxable gig,
the promoters can take a matching deduction for the VAT.the promoters can take a matching deduction for the VAT.
No net VAT cost arises.No net VAT cost arises.

17. VAT IssuesVAT Issues
Taxable v Exempt GigsTaxable v Exempt Gigs
• Benefits of taxable gigs clear to see from above exampleBenefits of taxable gigs clear to see from above example
• Relatively low rate of tax on incomeRelatively low rate of tax on income
• Potentially significant savings on costsPotentially significant savings on costs
• Not feasible in every scenario, but worth consideringNot feasible in every scenario, but worth considering

18. VAT IssuesVAT Issues
Issues for Venue OwnersIssues for Venue Owners
• Same as before if also operating as promoterSame as before if also operating as promoter
• Issue of box office needs careful attention ifIssue of box office needs careful attention if
• Third party promoter, andThird party promoter, and
• Event admission is taxableEvent admission is taxable
• Revenue have held venue owner liable to VAT on entireRevenue have held venue owner liable to VAT on entire
box office, even where contract in place with promoter tobox office, even where contract in place with promoter to
split box officesplit box office
• Clearly wrong, but that is their approach currentlyClearly wrong, but that is their approach currently

19. Key Point SummaryKey Point Summary
Is your charitable status secure?Is your charitable status secure?
• Are you still doing what you told Revenue?Are you still doing what you told Revenue?
Employees or self-employed contractors?Employees or self-employed contractors?
• Are you on the right side of the guidelines?Are you on the right side of the guidelines?
• Should you be revising contracts?Should you be revising contracts?
Is the VAT status of your gigs unhelpful?Is the VAT status of your gigs unhelpful?
• Could you be recovering more input VAT?Could you be recovering more input VAT?
• Are you accounting for the correct VAT on box office?Are you accounting for the correct VAT on box office?

20. Confront the OstrichConfront the Ostrich
What to do if you find tax underpaid?What to do if you find tax underpaid?
• Do not put the head in the sand and hope it will go away.Do not put the head in the sand and hope it will go away.
It is unlikely to.It is unlikely to.
• Reasonable mitigation of penalties, publication andReasonable mitigation of penalties, publication and
prosecution if an unprompted disclosure made toprosecution if an unprompted disclosure made to
Revenue.Revenue.
• Be careful about how you approach RevenueBe careful about how you approach Revenue
• For fools rush in where angels fear to tread.For fools rush in where angels fear to tread.

21. QuestionsQuestions
And, hopefully, some answers.And, hopefully, some answers.
Thank you.Thank you.