Upper Tier Tax Tribunal rules against Hippodrome Casino’s VAT recovery method in partial exemption case

• The First Tier Tax Tribunal (FTT) decision in the case of Hippodrome Casino Limited was about the method used to recover VAT on overhead costs.
• The Appellant used the standard method override (SMO) using a floor-based calculation, which the FTT agreed with.
• HMRC appealed the decision and won at the Upper Tier Tax Tribunal (UTT).
• The UTT found that the non-gambling areas of the casino still formed a significant cost component of the exempt gambling supplies.
• The UTT acknowledged that a floor-based calculation may be more reliable, but it must accurately reflect the use of the premises for different types of business.
• This decision reminds taxpayers to consider the SMO and use an alternative method that is more reliable than the standard method.
• HMRC may challenge the approach if they feel it’s not fair and doesn’t reflect the actual or intended use of the expenditure.
• The SMO should be considered when the residual input tax for a partial exemption year is at least £50,000.
• Adjustments under the SMO are only due when the difference in VAT recovery differs significantly from the result produced by the standard method.

Source:

• saffery.com
• KPMG

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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