In HMRC v Hippodrome Casino Ltd [2024] UKUT 27 (TCC) (29 January 2024) the Upper Tribunal (UT) allowed HMRC’s appeal holding that the taxpayer’s partial exemption override based on floor space did not guarantee a more precise calculation of recoverable VAT than the standard method.
Under basic partial exemption principles VAT incurred on overheads that are not directly attributable to either taxable or exempt sales must be apportioned to determine how much is recoverable. The default approach to apportionment is the standard-method which is broadly a turnover-based apportionment. Sometimes the standard method will not produce a fair result that closely reflects how costs are actually used. Where the result of the standard method is radically different to a fair result based on ‘use’ the standard method override (SMO) can be triggered.
The taxpayer (Hippodrome) operated an entertainment venue aimed at providing a ‘Las Vegas style experience’. The venue spanned five...
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