why is betting VAT exempt

SandC

And remember - because they are not VAT registered businesses they cannot therefore claim VAT back from the business expenses they incur like other companies can.

kennyboy66_2

Nosht wrote: »

It drove much gambling underground & cost a lot to administer & collect.

N.

It certainly didn't cost the government much to administer and collect (taxes generally don't when companies are collecting it for them).

It did drive some gambling underground (not a huge amount) though anyone going to a pub on Merseyside could usually find someone sitting in a corner taking bets on a saturday afternoon.

JasonLVC

kennyboy66 wrote: »

There is no supply of goods or services, so therefore cannot be any VAT applied.

Sorry to contradict you Kennyboy66.

There is a supply of services when you place a bet. At best, it is a kind of financial transaction.

For VAT to apply there has to be a 'consideration' (ie, money, barter, swap/exchange) and a supply (of goods or services or both).

If there is no consideration or no goods/services then the transaction is most likely outside the scope of UK VAT legislation. Whereas exempt, whilst not a rate of VAT, is still within the VAT legislation overall*.

Funeral services, education, postal services by RM, land and financial transactions (shares/insurance/pensions) are all exempt for VAT purposes but there IS a supply of services in each case, as there is with betting.

The exemption stems from Sch. 9, Group 4 of the VATA1994 which bizarrely was aimed at public interest services such as education/deaths, etc...but betting/gambling slipped on in there.

*outside the scope of UK VAT transactions do not stop the seller from reclaiming input tax (VAT on purchases) incurred, whereas exempt transactions block all input tax recovery (and thus increased overheads costs for the business).

Generali

JasonLVC wrote: »

At best, it is a kind of financial transaction..

If that is the case (and it's a reasonable argument IMO on a logical basis at least) then VAT should be chargable on the part of the odds that are the bookies profits.

Discovering that in a way that can be seen as reasonable in a law court is another matter entirely. If two horses are offered at 10-1 then what part of those odds are value added and what part a cost of doing business?

More pertinently, do you measure that cost before or after the horse crosses the line?

Really2

Generali wrote: »

More pertinently, do you measure that cost before or after the horse crosses the line?

It used to be 9% and you could pay before or from winnings (before made sense)

lifted from.
http://news.bbc.co.uk/sport1/hi/other_sports/1437204.stm
It also said.

Chancellor Gordon Brown announced the move in his March budget to stop the boom in off-shore tax-free gambling which costs the exchequer millions of pounds a year.

Which I agree with you can bet anywhere in the world with the aid of the internet.

JasonLVC

Generali wrote: »

If that is the case (and it's a reasonable argument IMO on a logical basis at least) then VAT should be chargable on the part of the odds that are the bookies profits.

Discovering that in a way that can be seen as reasonable in a law court is another matter entirely. If two horses are offered at 10-1 then what part of those odds are value added and what part a cost of doing business?

More pertinently, do you measure that cost before or after the horse crosses the line?

VAT is a transactional tax and so is not connected in anyway whatsoever to profit or loss. It has nothing to do with 'adding value' either if I'm to be honest with you.

You can make £££ losses each year but still have to charge VAT on the few sales you do manage to make. Equally I could buy in widgets for £1.00 from China and sell them to you for £1.00 (ie, make no profit at all) but I'd still have to charge VAT on the £1.00 I sell them for, even though I've done nothing to them.

The VAT law deems betting/gaming/lotteries as exempt from VAT so the physical act of placing a bet is the (exempt) transactional bit for VAT purposes, whichever horse wins, whether the bookie makes a profit or not is irrelevant from a VAT perspective.

Rank group won a massive victory (and about £30m) against HMRC recently. HMRC had treated certain types of fruit machine income as 17.5% and other kinds of machine as exempt. This was found to be ultra-vires (beyond HMRC's powers) and so Rank claimed back all the VAT they had charged customers and paid to HMRC over the years 2002-2005.

http://www.londonstockexchange.com/exchange/prices-and-news/news/market-news/market-news-detail.html?announcementId=10310990

Basically, everytime someone put a £1 into the slot the 31 should have gone to rank, instead, Rank had to pay over 17.5% of that £1.00 to HMRC as VAT so Rank only got to keep 85p per transaction/game played.

terryw

Generali wrote: »

If that is the case (and it's a reasonable argument IMO on a logical basis at least) then VAT should be chargable on the part of the odds that are the bookies profits.

Discovering that in a way that can be seen as reasonable in a law court is another matter entirely. If two horses are offered at 10-1 then what part of those odds are value added and what part a cost of doing business?

More pertinently, do you measure that cost before or after the horse crosses the line?

The "profit" percentage on bets with a bookie varies. On-course bookies work on a low margin - about 4 per cent. Shops work on about 10 per cent on football, and 15 per cent on horse-racing but the Grand National is probably on 20 per cent. If VAT were to be charged then presumably it would be on these percentages as there would be extreme difficulty in averaging them out.

terryw

JasonLVC wrote: »

VAT is a transactional tax and so is not connected in anyway whatsoever to profit or loss. It has nothing to do with 'adding value' either if I'm to be honest with you.

.

Generally, yes. But there are exceptions. Used car dealers pay VAT on the difference between buying and selling price, I think.

Really2

terryw wrote: »

Generally, yes. But there are exceptions. Used car dealers pay VAT on the difference between buying and selling price, I think.

But they are adding value. Also they would be paying vat on the used car if it was coming from a vat registered business (the only reason they don't get charged it off an end user is because end users are not vat registered.)

In reality selling anything second hand when vat registered is the same as selling new. Refurbished computers, electrical equipment etc.

terryw

Really2 wrote: »

But they are adding value. Also they would be paying vat on the used car if it was coming from a vat registered business (the only reason they don't get charged it off an end user is because end users are not vat registered.)

In reality selling anything second hand when vat registered is the same as selling new. Refurbished computers, electrical equipment etc.

The point that I was trying to make is that the VAT is only charged on the profit element and not on the total sale price.