Luxury house prize draw platform Omaze has appealed against HMRC over whether paid entries in its draws should be subject to standard-rate VAT.
The case was heard at the First Tier Tax Tribunal on Friday, with a decision expected in Spring next year following the landmark dispute.
Omaze launched in the UK in 2020, having originally been founded in the United States in 2012, and has since run prize draws offering multi-million-pound houses, cars, and cash for relatively small entry fees.
Properties featured in its draws are located across the UK, with many situated in desirable locations such as the Cotswolds and Cornwall.
The platform describes itself on its website as “not a charity raffle, house or cash raffle or house or cash lottery but a prize draw.”
Organisations that offer a free entry route, such as a postcard option, avoid regulation as a lottery under the Gambling Act, and HMRC categorises such services as prize draws, meaning paid entries do not qualify for the VAT exemption that regulated lotteries receive.
Labour MP Dan Tomlinson, who was responsible for HMRC and tax policy until July, confirmed that prize draws offering both paid and free entry routes “are not eligible for VAT exemption and paid entries will be subject to VAT at the standard rate of 20 per cent.”
An Omaze spokesperson confirmed that the platform “has been paying VAT in the UK since 2021,” but argued the situation creates an unfair disparity across the wider prize draw industry.
“Our appeal seeks clarity and consistency in how VAT applies across the prize draw industry,” the spokesperson said, adding that Omaze “has raised more than £150m for UK charities, yet is one of the few prize draw operators HMRC has required to pay VAT on sales.”
The spokesperson said the disparity “affects our ability to operate sustainably” and cautioned that it also affects the platform’s ability to “continue raising significant funds for good causes.”
Omaze donates a proportion of proceeds from each draw to charity and guarantees a minimum donation of £1m to its partner charities with every prize draw it runs.
The spokesperson added: “Having sought to resolve the issue for several years, we are pursuing this appeal to establish a level playing field. We appreciate the court’s attention to this issue.”
HMRC responded firmly to the appeal, with a spokesperson stating: “Our position is that prize draws offering both paid and free entry routes are not eligible for VAT exemption and paid entries are standard rated for VAT.”
The tax authority confirmed it will await the outcome of the tribunal process before taking any further steps in the dispute.