Driving Experience VAT Case: HMRC Loses Appeal

High-Speed VAT Dispute Comes to a Head

In a notable VAT case, Ingliston Driving Experiences Ltd, which offers supercar racetrack experiences in Scotland and Northern Ireland, successfully challenged HMRC’s VAT assessment. The crux of the dispute centered on whether these driving experiences could be classified similarly to amusement park attractions, qualifying for the temporarily reduced VAT rate enacted during the pandemic.

The Experiences in Question

Ingliston Driving Experiences allows customers the thrill of piloting high-performance vehicles. About 60% drive themselves while others are driven by professional instructors. Attendees can watch from the pit-lane, while non-paying guests observe from the paddock area.

Pandemic VAT Support Measures

In July 2020, to bolster UK tourism and hospitality through the pandemic, the government offered a 5% VAT rate on admissions to amusement parks and similar venues. Ingliston applied this rate, acting on the advice of its accountant.

Yet, in May 2021, HMRC assessed back VAT liabilities—totalling £31,794, less £15,200 input tax credit—asserting the events were not comparable to amusement parks or fairs. Ingliston appealed following an internal review upholding HMRC’s decision.

EU Directive and UK Legislation

At the dispute’s core lies the interpretation of EU Directive 2006/112/EEC, Annex III, item 7, which permits reduced VAT for admissions to cultural and recreational activities. The UK transposed these provisions via VATA 1994 and further through amendments during the pandemic, albeit under EU rules until the end of 2020.

Tribunal Reasoning and Rulings

The First-tier Tribunal (FTT) confronted three main arguments put forward by HMRC:

1. Collective Enjoyment: HMRC cited a past case (Erotic Center BVBA) suggesting there was insufficient collective enjoyment in driving experiences compared to concerts or amusement parks. The FTT disagreed, finding that racetrack events involve shared experiences akin to fairground rides.

2. Admission Fee Rights: HMRC argued that only paying customers benefit, unlike at concerts where all present are ticket holders. The tribunal countered that similarities—not identical features—are what matter for qualification.

3. Scale of Participation: Citing the small number of individuals per vehicle, HMRC claimed the experience was too individualized. The FTT dismissed this, noting that up to 200 participants attend on track days, fulfilling the requirement of collective access.

Ultimately, the FTT sided with Ingliston, ruling that the driving experiences were similar enough to amusement park or fairground attractions to merit the reduced VAT rate.

Expert Perspectives

"The issue came down to whether it was similar, not the same," commented the tribunal, emphasizing the importance of the nature and enjoyment of the activity, not just the mechanics.

James Johnson, a VAT specialist, noted:

“Tuition and supervision were for safety, not for providing driving skills. The appeal recognized the experience’s primary aim as entertainment—aligning it with fairground rides, not structured driving tuition.”

Key Takeaways for Businesses

• VAT Classification Requires Nuance: Services similar in spirit to cultural or amusement activities may be eligible for reduced rates during special periods.
• Professional Advice is Essential: Ingliston acted on professional guidance, which proved correct despite HMRC’s challenge.
• Precedent for Future Claims: This ruling may inform other experience-based operators considering VAT reductions in line with amusement and cultural events.
• Legislative Flexibility Post-Brexit: While the UK has been slow to amend VAT laws since leaving the EU, this case highlights possibilities for future reduced rate applications should the government so choose.

What Should You Do Next?

• Review the VAT treatment of experiential or entertainment-based services—especially if your business offers group activities.
• Consult with tax accountants for guidance on VAT classifications and possibilities for reduced rates.
• Monitor government updates on potential extensions or changes to VAT relief for cultural, tourism, and entertainment sectors.

Quick Reference: Tribunal’s Main Deciding Factors

Issue	HMRC’s View	Tribunal’s Decision
Collective enjoyment	Lacking	Present (race participants)
Benefits of admission	Too exclusive	Sufficiently public
Activity similarity	Not close	Similar to fairgrounds

The outcome is a clear reminder to both tax professionals and businesses that careful analysis and robust advice are vital in navigating complex VAT rules—especially in evolving economic conditions.