.png)
.png)
Bookmakers
HMRC have clarified their policy on the recovery of VAT incurred by bookmakers on specialist TV services, following the tribunal decision in Town and County Factors (19616).
The company argued that VAT incurred on TV facilities used to screen racing and sporting events was partly recoverable because they had a direct and immediate link with taxable supplies of gaming machines and refreshments, as well as exempt supplies of betting. HMRC's view was that the costs related wholly to exempt supplies so that no VAT was recoverable.
The tribunal supported the company, finding that VAT incurred on specialist racing TV was residual because the company added content to the broadcasts advertising their taxable services and because TV attracts customers into shops to play gaming machines. The tribunal also found that VAT relating to Sky Sports was residual as the costs related to all of the activities of the betting shop even though the broadcasts did not carry adverts for their taxable services.
HMRC are not appealing the decision and say that they accept that bookmakers who add content to specialist racing TV to advertise their taxable services, may now treat the VAT as residual. HMRC continue to believe that where no such content is added, the VAT incurred is wholly related to exempt betting and is not recoverable. HMRC accept that bookmakers may treat VAT incurred on Sky Sports as residual because the broadcasts are not exclusively related to exempt betting. VAT incurred on TV equipment is also residual provided it is used for broadcasts that relate to both taxable and exempt supplies. If the equipment is used wholly for specialist racing TV, then the VAT incurred is irrecoverable.
Even where VAT on specialist racing TV is residual, the amount of taxable use is likely to be very small compared with overhead costs such as lighting and heating. As a result, HMRC say that existing partial exemption methods may no longer produce a fair and reasonable result and may need to be amended. HMRC may seek to replace an unfair method or to amend its result. Bookmakers who consider that their method is no longer fair and reasonable should contact their VAT office with proposals for a new method.
Bookmakers may wish to claim input tax which was incorrectly treated as exempt. HMRC say that they must use the partial exemption method applicable to each accounting period unless there are exceptional circumstances as to why an alternative method is needed.
Business Brief 17/06, 19 October 2006
Disposable barbecues
HMRC have been asked to clarify the VAT treatment of the sale of disposable barbecues. Some retailers have been treating such sales as reduced rate or mixed rate supplies. The correct VAT treatment is that the sale of disposable barbecues is a single standard-rated supply, subject to VAT at 17.5%.
Business Brief 17/06, 19 October 2006
