Court of Appeal Upholds Standard VAT Method in Hippodrome Casino Case

• The Court of Appeal ruled against Hippodrome Casino Ltd (HCL) in a dispute over the calculation of recoverable input VAT, affirming that the taxpayer failed to demonstrate that a floorspace-based Standard Method Override (SMO) provided a more accurate reflection of economic use compared to the standard method, which remains the default for VAT apportionment.
• The Court upheld the Upper Tribunal’s decision to reject HCL’s floorspace method, stating that the taxpayer did not sufficiently address HMRC’s argument regarding the dual economic use of areas supporting both taxable and exempt supplies, ultimately concluding that the standard method was not displaced.
• Additionally, the Court confirmed that Article 5 of the Input Tax Order restricts recovery of input tax related to business entertainment uniformly, without consideration of the entertainment’s purpose, thus supporting HMRC’s approach to VAT apportionment and rejecting HCL’s proposal for a more complex commercial apportionment method.

Source KPMG

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• Court of Appeal dismissed Hippodrome Casino’s VAT appeal, upholding decisions by Upper Tribunal and HMRC regarding recovery of residual input VAT
• Casino argued for floor space method over standard turnover based method to calculate VAT deductions for mixed taxable and exempt activities like restaurants, bars and gambling
• HMRC rejected the proposed floor space override, stating it did not represent a more fair or reasonable result than the standard method
• Court affirmed that standard method is statutory default and taxpayers must demonstrate compelling evidence for alternative methods to be more precise
• Decision reinforces that partial exemption remains complex and courts reluctant to deviate from legislative defaults without strong justification across all business sectors

Source: xeinadin.com

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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