- 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:
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.
