The expenditure concerned relates to Satellite Information System (SIS) services which comprise a range of television services connected with horse and dog racing.  At one time, HMRC’s policy was not to allow VAT to be reclaimed to any extent on relevant costs even for betting shops which made taxable supplies as well as exempt betting supplies.  This policy had to be modified in 2006 following the Town & County Factors (VTD 19616) tribunal case.  Even in that situation, their policy limited VAT relief to programmes which included specific material provided by the bookmaker which related to its taxable activities.  This very restrictive reading of that decision was overturned in the case of Cheshire Racing Limited (VTD 20283), in which the tribunal criticised HMRC policy and said that these expenditures had reference to the entire activity in the betting shop, as it created an ambience which was attractive to customers in general.

HMRC has published a Brief (01/2008) in which it has withdrawn that restriction, and agrees that, where a betting shop carries out taxable activities as well as exempt ones, any related expenditure of this nature would be apportionable as a general cost of the operation.

Graham Elliott, VAT Partner, said: "It is refreshing to see that HMRC has accepted the tribunal’s implicit criticism of its policy.  In particular, the tribunal believed that HMRC had alighted upon a particular fact in the Town & County Factors decision which it then turned into a policy restriction. The temptation to elevate factual circumstances in cases to points of law appears to be one which HMRC finds difficult to resist, and is effectively an error of legal interpretation.  They have rectified this in the case of bookmakers, and I hope this means that they will review their general approach to such cases in the future."

Jeremy Beard, Sports Specialist Partner, said: "The Cheshire Racing VAT tribunal decision, and this HMRC announcement, open the way for substantial claims to be made by betting shops which carry out partly taxable supplies, and which use these systems.  These claims can go back at least three years, and probably more, depending on the outcome of other litigation in regard to VAT claims in general.  They should be paid with interest, which should probably be subject to a compound interest calculation, again under consideration in wider reaching litigation.  haysmacintyre would be very happy to guide any bookmaker through the potentially complex issues to which these interlocking VAT considerations give rise."

Contact:
haysmacintyre
Sarah Bannister
Tel: 020 7969 5575
Email: sbannister@haysmacintyre.com

About haysmacintyre
haysmacintyre, Chartered Accountants and tax advisers, comprises 24 partners and 150 staff based in Holborn, London. It provides high quality auditing and assurance, business and personal taxation, corporate finance, financial planning and other business support services.

haysmacintyre has a partner and senior manager dedicated to advising on all aspects of VAT. They have specialist knowledge of the not for profit/charities sector and also of the real estate sector but advise organisations in all sectors. The team provides a range of review, advisory, transactional support and appeal services.  Graham Elliott, the VAT partner, writes a monthly article for Accountancy and is a regular contributor to other media.