London’s Hippodrome Casino has failed to overturn a ruling on the method used to calculate the tax recovery for residual input tax.
The 24-hour casino, located in the heart of Leicester Square, also features restaurants, bars, and a theatre, where Magic Mike Live has been performing since 2018.
While most people attend the Hippodrome for gambling, there are also a number of individuals who enter the restaurants, bars, and theatre, opting to avoid the casino. As a result, the venue’s owners submitted a VAT claim to HMRC, seeking the recovery of some of their tax bill.
Hippodrome’s owners’ central argument against HMRC was whether the standard method for deducting input tax was “fair and reasonable” or whether its proposed floorspace method should be substituted.
But HMRC asserted that the floor space method did not reflect the economic use of the input tax.
The tax years 2012/13 to 2018/19 were the target of this challenge. Although no single cost was provided, the court noted the difference in recoverable input tax between the two methods for the main issue (partial exemption) for the tax years, totalling over £3.2m in differences.
The case was first brought to the First-Tier Tribunal, which sided with the West End business by agreeing that the floor space method provided “a more fair, reasonable and precise proxy” of its business.
However, that ruling was short-lived.
When the case reached the Upper Tribunal, it found that the First-tier Tribunal had made a material legal error by failing to address the core issue of dual use. As a result, the original decision was set aside.
The Hippodrome Casino went on to take that decision to the Upper Tribunal in June; however, the judges handed down their ruling today, finding the casino failed to prove its method was more precise, meaning the standard method applies by default.
The Tribunal dismissed the Hippodrome Casino case on all four grounds.