A) Item 1, group 4 of schedule 9 of the VAT Act 1994, states the ‘playing of any games of chance for a prize’ is an exempt supply. A game of chance is defined within Note 2 and includes:
(i) a game that involves both and element of chance and an element of skill.
(ii) a game that involves an element of chance that can be eliminated by superlative skill, and
(iii) a game that is presented as involving an element of chance, but
(b) does not include a sport.
Raffles are classified as a game of chance, therefore sales arising from selling raffle tickets are exempt supplies. As your client is making wholly exempt supplies, any input tax associated with facilitating these sales is not recoverable. This is also confirmed in VAT Notice, Betting, Gaming and Lotteries within section 13. ‘Prizes of goods and services in exempt betting and gaming should be treated as part of the exempt supply and no output tax is due on such prizes. Any VAT incurred in purchasing the prizes is exempt input tax which is not deductible, subject to the partial exemption rules.’
Exempt supplies do not count towards taxable turnover for registration purposes. Your client is making wholly exempt sales, so they should deregister for VAT unless they have a future intention to make taxable supplies.
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