Q&A: VAT on prize draw tickets

Croner VIP Tax Team

In this week’s Q&A, Danni Walker, adviser at Croner VIP Tax Team, warns HMRC is taking a new position on the VAT treatment when running a game of chance prize draw.

Q: My client sells entry tickets to a prize draw where you can win a car, should they charge VAT on the tickets?

A: Generally, raffle tickets or entry fees for a ‘game of chance’ would be an exempt supply as detailed in HMRC VAT Notice 701/29 Betting, gaming and lotteries, and VAT Notice 701/5 Clubs and associations’ VAT responsibilities. However, there is a caveat.

HMRC has started running a campaign to alert businesses that their view is that output tax is due on prize draw entry fees.

As a result, it has been suggested that HMRC’s view is that entry to a prize draw is seen as a competition entry fee, which is standard rated, except for some sporting competition entries which may be exempt, although due to the lack of guidance and/or case law, there is no clear reason for HMRC’s view on this.

Therefore, currently the game of chance exemption cannot be relied upon, and it is advisable to seek further advice to understand the nature of the ticket sales to determine the correct VAT treatment.

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