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HMRC internal manual

VAT Betting and Gaming Guidance

Bingo: composite bingo charges

It is usual for a participant in a game of bingo to make a single payment that will include stake monies as well as the participation fee. It may also include a charge for admission to the premises. The correct VAT liability must be applied to each, but difficulty can arise in distinguishing between these elements of the charge.

Normally the difficulty will be in determining whether a component part of the charge is stake or participation fee subsequently being used to top up the prizes to winning players. This is an important distinction, because, if that component is a participation fee, it may also become subject to bingo duty when returned as additional prize money that exceeds the stakes risked in the game.

Stakes risked by players that are returned to winners as prizes in that game are outside the scope of VAT. Outside-the-scope treatment also covers the part of the stake monies that is paid over as bingo duty. It is important to remember, however, that the additional bingo duty attaching to added prize money is likely to come from a source that has already been subject to VAT and no allowance is to be made for this fact. Traders will often claim that this duty element should not bear VAT because this constitutes double taxation but this is not a reason for relieving added prize money from the tax. A trader cannot increase the level of prizes from outside-the-scope stake monies, because, these sums are already to be returned to players. The extra prize must therefore come from other income, and whether that was previously exempt, taxable or outside-the-scope has no bearing upon the subsequent duty requirement.

A trader will seek to have as great a part as possible of any composite charge to be treated as outside-the-scope stake. This question has been considered by several tribunals, who have reached opposing conclusions.