The document summarizes three tax cases from the UK: 1) The First-tier Tax Tribunal ruled that sports camps operated by Sports Academies Ltd during school holidays were taxable activities, not exempt welfare services, because their primary purpose was providing sports activities, not childcare. 2) An Advocate General opinion in a Polish case found that a horse trainer entering her own horses in races was an economic activity eligible for input tax deduction, as it helped promote her training business. 3) The Upper Tribunal overturned a First-tier Tax Tribunal decision and ruled that "free" casino chips given to players had no value for gaming duty purposes since players put no money at risk when using them.

1. © 2016 Grant Thornton UK LLP. All rights reserved.
ITU
Summary
This week's edition looks at cases
from the First-tier Tax Tribunal,
the Court of Justice and the
Upper Tribunal.
In the Sports Academies Ltd
case, the taxpayer failed to
convince the First-tier Tax
Tribunal that its services (the
provision of sports camps
outside term time) were
essentially the care and
protection of children and young
people which is exempt from
VAT.
In a Polish case, the Advocate
General has issued an opinion
relating to the recovery of input
tax by a race-horse trainer.
Finally, in the London Clubs
Management Ltd case, the Upper
Tribunal has overturned an
earlier First-tier Tax Tribunal
decision relating to whether
gaming duty is due when 'free'
chips are staked in the casino.
22 June 2016
Sport Academies Ltd
The First-tier Tax Tribunal has issued an interesting decision this week in relation to
the VAT liability of sports activity camps operated by the appellant.
Sports Academies Ltd argued that, for VAT purposes, the sporting activities that it
provides to children between the ages of 3 and 17 should be regarded as exempt from
VAT under the provisions relating to the supply of welfare services. As a state
regulated body - the company is regulated by Ofsted - it argued that its supply of
school holiday activity camps were services that were directly connected with the care
or protection of children or young persons or that they were closely linked to such care
and protection. The company argued that the essence of its activities had always been
the provision of childcare during school holidays for working parents and that the
activities undertaken by the children were, if not irrelevant, secondary to that principal
aim.
HMRC, on the other hand, argued that the taxpayer's main aim is to offer sport and
activities to children during school holidays. Whilst there is an element of care involved
in what the taxpayer does, childcare is not the primary aim but is merely a by-product
of the supply of activity based courses. As such, the services provided by the company
were not welfare services as defined by VAT law but were taxable supplies of sports
activities.
Based upon the evidence before it, the First-tier Tax Tribunal sided with HMRC. It
agreed that the company provided an element of care for the children whilst they
attend the camps but it considered that such care was not the primary aim of the
service. The company provides a single service constituted by what is enjoyed or
received by attendance at its camps and the essential nature of that service is the
provision of the activities made available, rather than the care or protection of children
or young people. The services were, therefore not 'welfare' services and were taxable at
the standard rate.
Comment – There is often a fine line to be drawn and this case demonstrates
how fine that line can sometimes be. What is clear is that the Tribunals and
Courts will look at the evidence to determine what constitutes the essential aim
of a service. Here, it decided that the essential aim was not the welfare of the
children, but it was the supply of the pursuits and activities undertaken at the
camps in return for the fees paid by the parents.
Issue19/2016
Out-of-term sports camps are not the
provision of welfare services
Indirect Tax Update

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GRT100456
Pavlína Baštová
Court of Justice
The Advocate General has issued an interesting opinion in this Polish referral to the Court of Justice.
The main issue in the case relates to whether Ms Bastova – a trainer of race horses – is entitled to
reclaim input VAT incurred in relation to the costs of owning her own horses, the costs of operating
the training facilities and the costs associated with the entering of her own horses into races. The
Polish tax authority considered that, in respect of her own horses, she was not entitled to reclaim the
input VAT as there was no corresponding taxable activity. The authority considered that Ms Bastova
should, therefore, apportion the VAT incurred on the cost of the training facilities to reflect only that
element that was attributable to the training of horses owned by third parties.
The Advocate General disagreed with that view. Where, as in Ms Bastova's case, an owner entered
her own horses into races, this was an economic activity for VAT purposes. The purpose of entering
the races was to enhance the professional reputation of the trainer thereby increasing the potential
for future training contracts with third party race horse owners. It was clear from the evidence before
the court that the motive behind the decision to enter her own horses was to enhance her
professional reputation and, in the light of that evidence, the activity was akin to a marketing cost. In
the Advocate General's opinion, that meant that input VAT incurred on the associated costs can be
reclaimed. However, the corollary of that finding was that output VAT is due on any prize money
won by her horses.
Comment
The Advocate General
was careful to point out
that, in order to reclaim
input VAT a taxpayer
would need to
demonstrate and
evidence the purpose
of the activity. If the
costs of the activity are
clearly marketing costs
of an existing business
of training horses, then
the input VAT can be
reclaimed. If, however,
the activity is the
pursuit of a hobby, no
deduction will be
allowed.
London Club Management Ltd (LCM)
Comment
Gaming duty is an
excise duty that was
introduced with effect
from 1 October 1997.
Duty is payable on the
gross profits achieved
during a relevant period
and this is calculated by
reference to the value
of amounts staked less
the value of prizes paid
out. HMRC's assertion
that the free chips had
a value would have
increased the value
attributed to the
amounts staked and
thus increased the gross
profits subject to duty.
Upper Tribunal
This was a gaming duty case. The question to be resolved was whether 'free' gaming chips given to
customers to encourage them to play on the gaming tables had any value for gaming duty purposes.
HMRC considered that the chips had a face value and that gaming duty was due. The First-tier Tax
Tribunal (FTT) was also of that view and LCM appealed from the FTT's decision.
As a marketing tool, LCM gave free chips to customers who could use them to play, for example,
roulette. A winning bet would be paid out in cash chips. The FTT concluded that the objectively
ascertained value of a chip staked as a stake in a casino game is the face value of the chip, and that it
was irrelevant whether a stake staked is given to the player free of charge. As such gaming duty was
payable. The Upper Tribunal has, however, overturned the FTT's decision. Essentially, both the
legislation itself and the authorities support the argument that the value of the stake staked is the
amount which is put at risk by the player when staking the stake. That amount is the real amount of
money or money’s worth that is risked in the game. It is not some notional amount represented by
the face value of the stake. Clearly, when a customer stakes a free chip that has been given to him
gratuitously, he puts no money or money's worth at risk. Accordingly, the value of a free chip for
gaming duty purposes is nil. The FTT's decision was, therefore, flawed and LCM's appeal was
allowed.
Contact
Stuart Brodie Scotland stuart.brodie@uk.gt.com (0)14 1223 0683
Karen Robb London & South East karen.robb@uk.gt.com (0)20 772 82556