Black Pearl Entertainments Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 02 June 2011 |
| Neutral Citation | [2011] UKFTT 368 (TC) |
| Date | 02 June 2011 |
| Court | First-tier Tribunal (Tax Chamber) |
[2011] TC 01223
[2011] UKFTT 368 (TC)
Michael S Connell (Tribunal Judge) (Chairman)
Mr Simon Buchan of Messrs Barber Harrison & Platt, Chartered Accountants, Sheffield, for the Appellant
Mrs Kim Tilling, Senior Advocate of HM Revenue & Customs, for the Respondents
Application by commissioners to strike out appeal - Application by appellant for permission to appeal out of time - Appellant not initially advised of time limits - Whether initial claim a protective claim - The substantive appeal concerned a decision of the commissioners dated 17 January 2007 to deny a VAT claim - The appellant lodged its notice of appeal with the tribunal on 4 October 2010 - The dispute arose following the submission of a claim by the appellant for repayment of overdeclared output tax on gaming machine takings in the sum of £58,901, following a decision of the European Court of Justice in the cases of Finanzamt Gladbeck v Linneweber (C-453/02); Finanzamt Herne-West v Akritidis (C-462/02)[2007] BVC 227 - The commissioners refused the claim and although their decision letter did not include an offer of a departmental review of the decision it informed the appellant of the company's rights of appeal to the tribunal - No further information was provided and no time limits for appealing were mentioned - The appellant did not respond to or appeal the decision and the time-limit for appealing expired 30 days later, on 16 February 2007 - On 17 July 2009 the appellant wrote to the commissioners requesting a repayment of VAT on the basis of the subsequent decision of the High Court in R & C Commrs v Rank Group [2009] BVC 598 - The commissioners rejected the claim, informing the appellant that if it did not agree with the decision it could ask for a review or could appeal to an independent tribunal within 30 days - The appellant claimed not to have seen the reply and sent a reminder to the commissioners on 13 May 2010 - The commissioners replied on 11 June 2010 stating that the appellant's claim for repayment would not be processed for the reason that the appellant had not appealed the original refusal on 17 January 2007 - The appellant explained that the reason it had not appealed the original refusal was that it had made a decision to await the outcome of the Rank case - On 4 October 2010 the appellant lodged a notice of appeal with the tribunal - Held, that the time limit for the appellant to appeal was 30 days after the making of the appealable decision on 17 January 2007 and it was for the appellant to show good reason why the tribunal should exercise a discretion to allow an appeal to be made more than 3.5 years outside that time limit and more than one year after the second claim, which was also rejected - The tribunal had to consider the application in the context of the overriding objective, as set out in the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273), r. 2, which required cases to be dealt with fairly and justly in the circumstances - This involved a balancing exercise, having regard to the respective interests of the parties - The burden of showing why the tribunal should exercise its discretion to permit a late appeal fell on the appellant and, from the facts of the case, it was clear that the failure to lodge or pursue an appeal was entirely intentional on the part of the appellant, both in January 2007 following rejection of the initial claim and, if that initial claim could be regarded as a protective claim, again after July 2009 following the appellant's second claim - The appellant had the opportunity of appealing on both occasions within the appropriate time limits but failed to take it - In the circumstances, the tribunal found that there would be prejudice to the commissioners if the appeal were to be allowed to proceed - Appellant's application refused - Value Added Tax Tribunal Rules 1986 (SI 1986/590), r. 4.
1.This is an application by HMRC to strike out an appeal. The Appellant applies to the Tribunal for permission to appeal out of time against a decision by HMRC on 17 January 2007 to deny a VAT recovery claim. The Appellant lodged its notice of appeal with the Tribunal on 4 October 2010.
2.On 20 December 2006 the Appellant submitted a voluntary disclosure to recover £58,901 VAT which it had paid in respect of gaming machine income "from the 19 November 1992 to date". The Appellant explained that:
the reason for the claim is that we believe that output tax should not have been declared on amusement machine takings prior to 06 of December 2005 following the Linnewebber case by the ECJ. Up to this point, in the UK, takings from amusement machines commonly sited in pubs and clubs were subject to VAT at the standard rate. These machines are usually licensed under section 31 or section 34 (1) of the Gaming Act 1968. However the takings from other amusement machines such as fixed odds betting terminals (FOBT's) and section 16 and 21 machines which are similar to the types of machine found in pubs and clubs were VAT exempt.
The ECJ in the Linnewebber case ruled that you cannot tax "like" services differently, and found that the German VAT authorities were incorrectly exempting amusement machine takings in casinos but subjecting them to VAT in other venues
It is our view that prior to 06 December 2005 in the UK, HMRC were also applying different VAT treatments to "like" services and that this treatment is incorrect following the ECJ decision in the Linnewebber case.
We have attached a schedule of output tax has declared on amusement machine takings up to 05 December 2005 .....
3.The background to this case is that prior to 6 December 2005 the takings of gaming machines as defined in Value Added Tax Act 1994 schedule 9 group 4Group 4 of Schedule 9 to the VAT Act 1994 were liable to VAT at the standard rate of 17.5%, because they were excluded from the exemption for betting and gaming which that Group provided. The then current definition of "gaming machine" covered those machines where the element of chance in the game was provided by "means of the machine", which were taxable for VAT purposes, whereas games of chance played on machines where the result is determined by other means were VAT exempt. Some machines were configured so that the random number generator which determines the outcome of the game was sited outside the machine and consequently those machines fell outside the definition of a taxable gaming machine. Other machines had been developed to take advantage of section 16 of the Lotteries and Amusements Act 1976 or section 21 of the Gaming Act 1968 i.e. that provide small prize gaming, and FOBT's, which were respectively subject to Amusement Machine Licence Duty and General Betting Duty but VAT exempt. The Linnewebber case, decided that eu-directive 77/388 subsec-or-para B article 13Article 13B(f) of Sixth Council Directive (EEC) 77/388 (on the harmonisation of the laws of member states relating to turnover taxes - common system of value added tax: uniform basis of assessment) precluded national legislation which provided that the operation of all games of chance and gaming machines was exempt from VAT where it had been carried out in licensed public casinos, while the operation of the same activity by traders other than those running casinos did not enjoy the same exemption. The suggestion was that UK law that similarly breached the European Community principle of fiscal neutrality because of the different VAT treatment of similar machines. The revised definition of a gaming machine, which came into force on 6 December 2005 changed the definition of gaming machine so as to provide that FOBT's and section 16/21 machines were defined as gaming machines and also created greater certainty by confirming that, where the element of chance in the game is...
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