HMRC Accepts Cheshire Racing VAT Decision

United Kingdom

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

HMRC has issued Business Brief 01/2008 stating that it accepts the decision of the VAT Tribunal in the case of Cheshire Racing Ltd (VTD 20283). The Tribunal found in favour of Cheshire Racing Ltd, which argued that the input tax it paid on the Satellite Information System ("SIS") services it received should be partially recoverable, because there was a direct and immediate link between the content of the SIS broadcast and the gaming machines used at its premises. This was held to be the case even where the requirement from the earlier ruling of Town and County Factors (VTD19616) that the bookmaker in question add information to that provided by SIS was not satisfied (some bookmakers process the betting information provided by SIS and add to its content, such that it can be said that the supply of information to customers is made alongside the supply of betting services, etc).

In practical terms, this means that VAT paid by bookmakers to SIS (and, perhaps, Turf TV) for the provision of broadcasting services will, where the bookmaker has gaming machines, generally be recoverable in part. This is due to the fact that unlike other bookmaking services (which are exempt for VAT purposes) supplies of gaming machines are standard rated for VAT purposes. The amount of VAT recoverable will be determined in accordance with the bookmaker's residual VAT recovery rate.

Bookmakers should consider whether it might be possible to argue that, in respect of other supplies of goods and services that are bought in and in relation to which it incurs input VAT, there is a direct and immediate link between those supplies and their gaming machines or other standard rated VAT supplies. Where such an argument can be made successfully, that input VAT might also be capable of being recovered in part.

HMRC has announced that bookmakers wishing to claim input tax which, in the light of this decision, was incorrectly treated as exempt (and therefore not available to deduct against output tax), should submit claims to their Local Business Advice Centre.