Omaze's Tax Tribunal Fight Shows the Rules Around Prize Draws Are Still Being Contested

Last Friday, the First Tier Tax Tribunal heard one of the most consequential cases the UK prize draw sector has seen. Omaze, the platform whose multi-million pound house draws in the Cotswolds, Cornwall and beyond have become a fixture of British advertising, is appealing against HMRC's position that paid entries in its draws must carry VAT at the standard rate of 20 per cent. A decision is not expected until Spring, but the outcome will shape the economics of every paid-entry draw in the country.

The stakes are easy to understate. Omaze says it has paid UK VAT since 2021, has raised more than £150 million for UK charities, and argues it is "one of the few prize draw operators HMRC has required to pay VAT on sales". Its stated aim is "clarity and consistency in how VAT applies across the prize draw industry", because that disparity, in its words, affects its ability to operate sustainably. HMRC's position is unchanged: prize draws offering both paid and free entry routes are not eligible for the VAT exemption that regulated lotteries receive, and paid entries are standard rated.

When a business model hangs on a definition

The whole dispute rests on a fine line drawn by the Gambling Act 2005. A draw that offers a genuine free entry route, such as a postal option, is not regulated as a lottery, which is precisely why Omaze describes itself on its own website as a "prize draw" and not a house raffle or lottery. Sitting outside licensed gambling brings commercial freedom, but it also means paid entries do not qualify for the VAT treatment that registered lotteries enjoy. Earlier this year, Dan Tomlinson, then the minister responsible for HMRC and tax policy, confirmed that mixed paid and free entry draws "are not eligible for VAT exemption and paid entries will be subject to VAT at the standard rate".

For an operator, that is an uncomfortable place to do business. The very feature that keeps a prize draw outside the gambling regime, the free entry route, is the feature that exposes its revenue to a 20 per cent tax that some competitors may not yet have been asked to account for in the same way.

A level playing field has to be proven, not just claimed

Omaze's call for a level playing field is understandable, but it points at a deeper truth for the sector. When the boundaries between a prize draw, a lottery and a raffle are being contested in tribunals rather than settled in guidance, every operator's classification is only as strong as the evidence behind it. Does the free entry route genuinely work? Are terms and entry routes presented clearly and consistently? Is the draw run exactly as advertised?

The DCMS Voluntary Code of Good Practice for Prize Draw Operators already asks signatories for exactly this kind of transparency and accountability, because regulators and tax authorities increasingly probe whether operators mean what their marketing says. An operator that can document how its draws function, from entry routes to winner selection, is in a far stronger position when HMRC, a trading standards officer or an advertising regulator comes asking.

Do not wait for a ruling to know where you stand

The tribunal's decision will land in Spring, and whichever way it goes, scrutiny of how paid-entry draws are structured and accounted for is only going to increase. The operators who weather that scrutiny will be those who treated clarity as an operating requirement rather than a legal afterthought.

That starts with knowing precisely where your own operation sits: your entry routes, your VAT treatment, your terms, and your evidence that every draw is conducted fairly and openly. It is also why we encourage operators to pair certification against the DCMS Code with independent winner selection, so that the fairness claims in your marketing are backed by processes you can actually show to a regulator, an accountant or a customer.

If the Omaze case tells the sector anything, it is that the definitions around prize draws are still being fought over, and the operators who can prove their compliance will be the ones left standing when the arguments are settled, via UKCPSA certification, our regulatory advisory support, or independently verifiable winner selection from Winner Select.