LK Shields Solicitors recently represented a bookmaker who successfully challenged certain VAT assessments raised by the Revenue Commissioners in respect of payments made by that bookmaker to the British Horseracing Board (BHB).

The key question in terms of whether VAT should attach to the BHB payments made by bookmakers was whether a "VATable" service was supplied by the BHB.

From 1987 bookmakers had received pre-race data (such as names of horses and their riders etc.) from a company called SIS. In late 2001, the BHB claimed that they had database rights in the data supplied by SIS to bookmakers and sought payment of a licence fee from bookmakers. The BHB contended that if the licence fee was not paid, they would arrange for SIS to cut off the information feed which bookmakers received from SIS. Certain bookmakers issued Commercial Court proceedings against the BHB in 2004 and those proceedings were settled in 2005.

Revenue raised assessments against the bookmaker which were appealed to the Appeal Commissioners.

The Appeal Commissioner found as a matter of fact that the settlement of prior litigation did not constitute consideration for any services and held that BHB payments were made under duress. He also found as a matter of fact that no service had been provided to the bookmaker by the BHB. In addition, the Appeal Commissioner considered (amongst other case law) EU case law including the Apple and Pear case (ECJ 102-86) and the Tolsma case (ECJ 16-93) and held that in order for the BHB to have provided electronically supplied services, there would have been an intimate link between the service allegedly supplied by the BHB and the payments made.

The Appeal Commissioner also considered the decision of Phonographic Performance v Inspector of Taxes (1991) and held that the BHB could not claim any copyright in respect of services supplied by SIS and as there was no "toleration of a situation" and "no exploitation of a right" as set out within the Copyright Act 1963.

Having heard evidence over the course of two days, the Appeal Commissioner held that no service had been supplied. The assessments that had been raised against the Bookmakers were vacated.

The success of the taxpayer in this case has established the principle that payments obtained by the BHB from the bookmaking industry were not subject to VAT and in so far as VAT has been paid over, such VAT should now be recoverable subject to the relevant provisos set out in the VAT acts. Section 20(5) of the Value Added Tax Act 1972 provides that tax can be refunded where a mistaken assumption was made by the taxable person that VAT had been accounted for.

While the Revenue Commissioners have indicated that they wish to appeal the decision of the Appeal Commissioners by way of a case stated to the High Court, the decision of the Appeal Commissioners represents an authority unless and until this decision is overturned on appeal.

It is now expected that many bookmakers will seek recovery of VAT paid by them to the Revenue Commissioners.

January 2008.

For further information please contact Eoin Cunneen.