Sports-organisations@x2A VAT related dispute between HMRC and Sportech which has been ongoing since 2014 has reached the end of its latest match. Sportech have won against HMRC in the Court of Appeal, though it remains to be seen if this means they’ve won the actual league, to keep the football metaphor going. HMRC have just a few more days in which to lodge an appeal against the decision.

The dispute hinges on the treatment of VAT in a game of chance rather than a game of skill. Back in 2014 the First-tier Tribunal upheld an appeal by Sportech in relation to their “Spot the Ball” competitions.

The case arose from a claim for refunds of VAT that totaled about £72.5 million plus interest (in the region of £97m) derived from HMRC’s belief that the competition was not a “game” and, if it was, that it was a “game of skill” not a “game of chance”, so the supplies made by the promoters were not VAT exempt.

The Tribunal agreed with the promoters that the competition was a “game” and that whilst there was an element of skill (in determining roughly where the review panel that decided where the ball should be would place it), the precise placement of the cross in relation to the location selected by the panel was essentially a matter of chance.

It followed that the Tribunal decided that the supplies were VAT exempt. However HMRC took the dispute into extra time by appealing to the Upper-tier Tribunal against the First-tier Tribunal’s decision in relation to this multi-million pound VAT battle.

The impact on Sportech in financial terms has been extreme. Initially following the First-tier Tribunal, Sportech received a major tax refund after winning the case. They then had to return that £93 million tax rebate. Shares in Sportech then fell by just over 18p to 58p which wiped £38.5 million from the company’s market value.

However more recently Sportech saw its shares rise after the Court of Appeal ruled unanimously that its Spot the Ball competitions should not have been subject to VAT as they were games of chance, not skill.

Like the fortunes of football teams dealing with HMRC can be a roller-coaster ride. It’s always wise to make sure you’re getting the best advice on how to deal with any challenges over your treatment of VAT in your business. Speak to our VAT experts today

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