In the Royal Opera House Covent Garden Foundation v HMRC [2019] TC7157 the FTT made a helpful analysis as to when taxable supplies can be directly associated with production costs for the purposes partial exemption allocation of residual input tax. HMRC subsequently appealed this decision to the Upper Tribunal who decided that no direct links existed.

  • Royal Opera House Covent Garden Foundation 'ROH' made a claim to recover VAT input tax of £532,069 on staging productions in 2011-12.
  • Admission to the opera or ballet is an exempt supply for VAT purposes: its ‘cultural services’ etc.
  • ROH also makes a number of taxable supplies (eg programme sales and production specific commercial sponsorship) to which the Production Costs have a direct and immediate link.
  • Due to the link to both exempt and taxable supplies the input tax associated with the Production Costs is residual input tax, see Partial Exemption

The dispute was whether there is a direct and immediate link between the Production Costs and the following taxable supplies.

The tribunal considered a substantial volume of case law and concluded as follows


Direct link


Catering income (bars and restaurants)


Production Costs, are essential for the ROH to make its catering supplies

Shop income


Shop sales were separate and ‘freestanding’ supplies

Commercial venue hire


Hire has no connection or link with any specific production

Production work for other companies


Work is undertaken at a fixed price, which includes materials and labour, and as such the Production Costs cannot be a cost component of these supplies.

Ice cream sales.


As with catering, the productions, with their associated costs, are essential for the sale of ice creams


Our useful guides

Partial Exemption
How do you calculate the amount of input tax you can recover under the VAT partial exemption rules? What are the de minimis rules?

External links

The Royal Opera House Covent Garden Foundation v HMRC [2019] TC7157