IFX Investment Company Ltd & Ors v Revenue And Customs

Whether an activity is a “game” for the purposes of the gaming exemption is primarily a question of fact and statutory context. The term has a wide meaning. There is no legal requirement for inter-player interaction, or for a competitor to respond to another move or changed circumstance. Active participation may remain relevant. When applying domestic VAT legislation, a tribunal may consider the reality of the competition rather than contractual descriptions. An appellate tribunal may disturb a factual finding only for an error of law. The appeal succeeded because the Upper Tribunal imposed an impermissible interaction requirement and substituted its assessment for that of the First-tier Tribunal.

The appellants operated, or succeeded to operators of, “Spot the Ball” competitions during the period 23 April 1979 to 31 December 2006. The First-tier Tribunal held that panel Spot the Ball was a “game of chance” within the Gaming Act 1968 and therefore fell within the gaming exemption in Group 4 of Schedule 9 to the Value Added Tax Act 1994.

The Upper Tribunal, in [2014] UKUT 398 (TCC), held that playing a game ordinarily required interaction with another player or a changed circumstance and reversed the FTT’s decision on the “game” issue. The appeal concerned whether that requirement was legally necessary. HMRC also relied on a respondent’s notice contending that the activity was not a game of chance.

The Court of Appeal unanimously allowed the appeal, dismissed HMRC’s respondent’s notice and restored the First-tier Tribunal’s decision.

1. Meaning of “game”. Arden LJ held that whether an activity is a game under the Gaming Act 1968 is primarily a question of fact, assessed in statutory context and according to ordinary language. The term has a wide meaning: Rosenbaum v Burgoyne [1965] AC 430. Refined analytical rules are unsuitable where the fact-finder has reached a sensible conclusion: Seay v Eastwood [1976] 1 WLR 117.
2. Interaction. The bingo authorities did not establish an inter-player interaction rule. Communication and interaction may be relevant factors, but they are not necessary elements of a game. The competitor’s active decision to locate the ball and place a cross constituted participation. The weight of the relevant facts was for the FTT, and the UT erred by substituting its own assessment.
3. Section 52(6). The FTT was entitled to rely on section 52(6) of the Gaming Act 1968. That provision reinforced that a game may be played otherwise than against another player. The Act did not create a separate legal requirement of interaction for multi-player games. Morgan J agreed, adding that the statutory definitions of “player” in the earlier legislation did not support such a requirement.
4. Game of chance. The FTT was entitled, when applying domestic VAT legislation, to look beyond contractual documentation to the reality of the offer and competition. The position might differ when applying a VAT directive, as illustrated by Secret Hotels2 Ltd v HMRC [2014] STC 937. No finding or evidence showed that superlative skill could eliminate chance in panel Spot the Ball. HMRC therefore could not succeed on that point through the respondent’s notice.

1. Court of Appeal (Civil Division) allowed the appeal and dismissed the respondent’s notice.
2. Upper Tribunal (Tax and Chancery Chamber), in [2014] UKUT 398 (TCC), held that the First-tier Tribunal had erred in law by treating panel Spot the Ball as a game without inter-player interaction.
3. First-tier Tribunal held that panel Spot the Ball was a game of chance within the statutory gaming exemption and allowed the operators’ appeals.