New method is fair

26 November 2010

Issue: 4283 / Categories: Tax cases , VAT

London Clubs Management Ltd v CRC, Upper Tribunal (Tax and Chancery Chamber)

The taxpayer company operated casinos. It used a modified turnover partial exemption special method (PESM) in relation to a residual input tax claim for VAT on its business. Most of its turnover derived from gaming which is an exempt activity.

In 2007 the taxpayer proposed a new PESM focusing on a floor based measure of use and overheads. This was to take account of the fact that some customers attended casinos for the food drink and entertainment facilities without taking part in any gambling.

The previous existing method had made special provision for food and drink supplied free of charge to certain gaming customers.

The issues before the First-tier Tribunal were whether the new method fairly represented the taxpayer’s use of residual VAT bearing inputs and if so whether it did so in a fairer way than the existing PESM. The...

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