06.11.13 What are the Odds on that? Racing Tipster Wins £85,000 VAT Rebate

Victorangle Ltd v The Commissioners for Her Majesty’s Revenue and Customs

Mr Loughton, sole Director of Victorangle, won an appeal and a £85,000 VAT rebate after proving that there was no supply.

The Appellant (Victorangle Ltd) appealed against two decisions of the Respondent (HMRC). The two decisions were;

1. The refusal of the respondent to accept a Voluntary Disclosure claiming a £85,095.12 refund of VAT for the period 1 November 2008 to 30 June 2010. The refusal was on the grounds that there had been no supply and consideration.

2. The Refusal of the Respondents to accept the Appellant’s deregistration for VAT on 18 November 2010. The refusal was based on the decision that the Appellant was correctly registered as they were still making taxable supplies.

Mr Loughton has been involved in horse racing for over 30 years. In 1997-98 he set up a business as a horse racing tipster, where he would make money solely from people phoning a premium rate telephone number to hear the betting tips. However in 2000-1 Mr Laughton used a different approach and instead received his sole income from a monthly fee he charged clients, who would then call a local cost telephone number and hear betting tips.

In 2004-5 several bookmakers closed Mr Laughton’s accounts meaning he could no longer place his own personal bets. Mr Laughton decided to write directly to personal contacts on the Company’s database and also advertise in publications such as the Racing Post, in order to find other people, “punters,” to place bets on his behalf.

Mr Laughton had a simple idea which was to at all times provide the stake to the punter; the punter would place the bet and then would account the Company for any winnings. In return, the punter would have the opportunity to back the same horse themselves.

Daily Mr Laughton and his staff at the Company would select the horses to be backed and identify the bookmakers offering the best price. He and his staff would then phone some of the 40 punters which they used and ask if they could place a bet that day. The punters that were unable to place the bet, or did not answer the phone, did not receive any information about what horses were to be backed. Those that were able to place a bet would be told which bookmaker to use and the odds on offer for the horses. When an individual entered the relationship with Mr Laughton the size of the bet was also agreed. Over the phone the punter would find out the name of the horse, the odds to obtain and the amount to place. It would then be up to the punter if they wanted to back the horse too. If the horse won, Mr Laughton would be able to calculate what winnings he won and would contact the punter to confirm the amount the punter would be accounting for him. If the horse lost there would be no post-race phone call.

Periodically the punter would account Mr Laughton for the accumulated winnings, or Mr Laughton would account to the punter for any lost stakes. The punter was therefore never out of pocket or in profit. Mr Blandford worked as one of Mr Laughton’s punters and confirmed they had an on-going account and always knew where they stood. Mr Laughton had no knowledge of Mr Blandford placing any of his own bets.

Mr Laughton was never concerned with any additional bets the punters may have placed for themselves, and would never know if any had been placed and if so, what sum. His only concern was to receive the winnings on the bets he had placed through the punter or account the punter for his lost stakes.

Section 4(1) of the VAT Act 1994 states that “VAT shall be charged on any supply of goods or services…” and the Respondents believed Mr Loughton was providing the punter with a tip which was the supply. The Respondents also argued that it was a continuous supply as the transactions were multiple and on-going.

The only agreement was for the punter to provide a service to Mr Loughton, which was to place a bet on his behalf. Therefore, it was contended that the supply was by the punter to the Appellant by placing bets on Mr Loughton’s behalf and collecting and remitting the winnings, and not that the Appellant is making the supply to punters through tips in return for a payment equivalent to the winnings.  The information provided by Mr Laughton is an integral part of the service which would not be possible if it was not provided to the punter.

The Appellant was successful as the Judge rejected the contentions of the Respondents that Mr Laughton was making a taxable supply of ‘tipster’ information to the punters and that the winning were a form of consideration for the supply.