This Court of Appeal decisions looks at the definition of a game of chance - and therefore whether the conditions for the Betting & Gaming VAT exemption are met.

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Summary
UK VAT law exempts from VAT
'the provision of any facilities for
the placing of bets or for the playing
of any games of chance for a prize'
IFX took the view that the game
known as 'Spot the Ball' – where the
player selects where he considers
the ball is most likely to be in a
picture where the actual ball has
been removed – is a game of chance
falling within the exemption.
HMRC disagreed but the First-tier
Tax Tribunal disagreed. The Upper
Tribunal reversed that decision but
now, the Court of Appeal has
restored it.
HMRC has 56 days to apply for
leave to appeal to the Supreme
Court. Given the tax involved it
must be considered likely that an
application will be made.
05 May 2016
Court of Appeal
The Court of Appeal has issued a unanimous judgment in favour of the taxpayer in the
long-running VAT case relating to whether 'spot the ball' competitions are exempt from
VAT or are subject to VAT at the standard rate.
IFX Investment Company Ltd (IFX) (and others) operate a 'spot the ball' competition
and contended that the competition was a 'game of chance'. According to IFX, this
meant that income from the competitions it ran were exempt from VAT under the
betting and gaming provisions of the VAT Act.
HMRC took issue with that view. It did not consider that Spot the Ball was a game nor
did it consider that it was a game of chance. IFX appealed to the First-tier Tax Tribunal
which upheld its case. It rejected HMRC's arguments that, for there to be a 'game' there
had to be either an interaction between two or more players or a single player had to
respond to a change in circumstances. It also ruled that Spot the Ball was, in fact, a
game of chance.
HMRC appealed to the Upper Tribunal which ruled in favour of HMRC. The Upper
Tribunal considered that the First-tier's decision - that there was no requirement for
player interaction – was an error of law and, as such, it reversed the decision.
IFX appealed to the Court of Appeal which has unanimously decided that the First-tier
Tribunal did not make any error of law. As a consequence, the operation of the Spot
the Ball competition is, for the purposes of the Gaming Act, a game of chance and, in
turn, this means that the income received by the promoter of the game was exempt
from VAT.
Comment – This is the latest step in the litigation that has taken over seven
years to get this far. The victory at the Court of Appeal is worth over £97 million
to IFX alone. However, given the values involved one can anticipate that HMRC
will seek leave to appeal the issue to the UK's Supreme Court
'Spot the Ball' - It's a game of chance!
Case Alert
Contact
Irena Nelson irena.nelson@uk.gt.com (0)20 772 82239
Karen Robb karen.robb@uk.gt.com (0)20 772 82556
Nick Garside nick.garside@uk.gt.com (0)20 786 52331