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- 1. © 2016 GrantThornton UK LLP. All rights reserved. ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton UK LLP is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another’s acts or omissions. This publication has been prepared only as a guide. No responsibility can be accepted by us for loss occasioned to any person acting or refraining from acting as a result of any material in this publication. grant-thornton.co.uk GRT100456 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