Omaze challenges HMRC over 20% VAT on house prize draws

Omaze has taken HMRC to the First-tier Tribunal over whether paid entries to its UK luxury house prize draws should attract VAT at 20%, as first reported by City AM.

The operator says it has paid UK VAT since 2021 but argues that the treatment of businesses across the prize draw industry is inconsistent. The source does not disclose a sum at stake in the appeal.

What happened

The dispute concerns draws that allow customers to pay for entries while also providing a free way to participate. That distinction separates their tax treatment from that of regulated lotteries, which benefit from a VAT exemption.

A free entry option, such as entering by postcard, allows an operator to run a draw without being regulated as a lottery under the Gambling Act. HMRC classifies that service as a prize draw, with paid entries falling outside the lottery exemption.

Omaze’s website describes its competitions as prize draws rather than charity raffles, house or cash raffles, or lotteries. Its fundraising role therefore sits alongside a commercial entry model whose VAT treatment is now before the tribunal.

The background

Omaze was founded in the US in 2012 and entered the UK market in 2020. Its draws offer entrants the chance to win multi-million-pound homes, cars and cash for a comparatively small payment.

The properties are spread across the UK, including locations in the Cotswolds and Cornwall. A proportion of draw proceeds goes to charity, with Omaze guaranteeing its charity partners a minimum donation of £1m for each draw.

The company says it has raised more than £150m for UK charities. That fundraising total is separate from the tax issue: the appeal concerns VAT on paid entries, rather than the size of donations to beneficiaries.

What people are saying

Omaze argues that it is among a small number of prize draw operators HMRC has required to pay VAT on sales. That is the company’s account of how the rules are applied across the sector, rather than a finding by the tribunal.

Its spokesperson said the resulting disparity made it harder to operate sustainably and affected its capacity to keep generating substantial charitable donations. The company said it had spent several years trying to resolve the matter before pursuing an appeal aimed at securing consistent treatment.

HMRC maintains that draws combining paid and free entry routes do not qualify for VAT exemption and that paid entries must be taxed at the standard rate.

Dan Tomlinson, the Labour MP who held responsibility for HMRC and tax policy until July, also set out that position earlier in the year. He confirmed that paid entries in draws offering both routes were subject to 20% VAT.

What happens next

The tribunal heard the appeal on Friday, with a decision expected in the following spring. The source gives no calendar date for the hearing or year for the anticipated ruling.

HMRC said it was awaiting the tribunal’s decision. No outcome has been reported, so Omaze’s challenge has not established a change to the VAT treatment of its paid entries.