Summary
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The Chartered Institute of Taxation (CIOT) reported on 24 July 2026 that HMRC has launched a “one-to-many” campaign alerting relevant businesses to its view that output VAT is due on prize draw entry fees. Recipients of the letters are urged to review their VAT accounting position for such fees and to contact HMRC if corrections are needed. The letters are not copied to recipients’ nominated tax agents, though sharing is suggested. [tax.org.uk], [claritaxnews.com]
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HMRC’s position, confirmed by Treasury minister Dan Tomlinson on 17 February 2026, is that prize draws offering both paid and free entry routes are not eligible for the betting, gaming and lotteries VAT exemption, so paid entries are standard-rated at 20%. This challenges a widespread industry assumption. DCMS research valued the UK prize-draw market at around £1.3 billion annually, with 7.4 million adult participants across more than 400 operators. [apexaccountants.tax], [pinsentmasons.com]
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VAT experts caution the position is far from settled: Pinsent Masons noted HMRC’s history of over-restrictive readings of the exemption (paying out £97 million over “spot the ball” in 2016), predicting litigation is “inevitable.” Large businesses adopting a position contrary to HMRC’s “known” view may need to disclose under the uncertain tax treatment regime. Operators face potential historic exposures and must reassess whether ticket sales attract VAT. [pinsentmasons.com], [tax.org.uk]
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