Buckingham Bingo Ltd v Revenue and Customs Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 02 May 2019 |
| Neutral Citation | [2019] UKUT 140 (TCC) |
| Date | 02 May 2019 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2019] UKUT 140 (TCC)
Upper Tribunal (Tax and Chancery Chamber)
Judge Jonathan Richards, Judge Andrew Scott
Geoffrey Tack, instructed by DLA Piper UK LLP, appeared for the appellant
Peter Mantle, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Value added tax – (1) Whether company had appealed against appealable decision – No – (2) Whether extension of time should be granted to permit a late appeal against a previous appealable decision – No – Company's appeal dismissed.
The Upper Tribunal (UT) dismissed the appeal by Buckingham Bingo Ltd (BBL) against the decision by First-tier Tribunal (FTT) to strike out its late appeal.
There was a dispute between BBL and HMRC regarding the VAT treatment of its bingo business. HMRC changed their policy and required BBL to account for VAT using a session basis, instead of a game-by-game basis. BBL concluded that, even though calculating VAT on a session basis did not alter the total that it received from its customers, it cut the proportion of those sums that constituted participation fees, which were subject to VAT. Thus, BBL reclaimed the output tax that it argued had been overpaid.
BBL issued an “internal credit note” to try to adjust the consideration for bingo sessions from 1 January 1997 to 30 September 2004. BBL argued that the internal credit note cut the amount of (taxable) participation fees that it received in that period under Value Added Tax Regulations 1995 (SI 1995/2518), reg. 38 by altering the proportion of its total receipts that was VATable. HMRC denied that it had that effect. BBL reflected what it regarded as a cut in taxable consideration in its VAT return for the 12/11 period, which it filed on 21 January 2012 and which included a claim for a VAT repayment of £1,616,384. On 3 July 2012, HMRC issued a decision letter (the 2012 Letter) rejecting the claim for the VAT repayment. It was agreed that this was an appealable decision.
On 14 September 2012, BBL's advisors wrote to HMRC stating that, while they disagreed with the decision in the 2012 Letter, BBL had decided not to challenge that decision.
On 5 January 2017, HMRC wrote the “2017 Letter” stating that (1) the 2012 Letter contained their decision on the reg. 38 adjustment and (2) it was not a fresh decision, rather it affirmed the decision that had been made on 3 July 2012.
BBL's appeal before the FTT relied on three arguments:
- there was no time limit within which a reg. 38 adjustment must be made;
- HMRC had breached their continuous duty to process the 12/11 VAT return that contained the reg. 38 adjustment; and
- the 2017 Letter contained an appealable decision (i.e. refusing to process the 12/11 return), against which BBL had made an in-time appeal to the FTT.
The FTT had rejected all three arguments ([2018] TC 06487).
BBL appealed to the UT against the FTT's decision on the following grounds:
- the FTT had made an error in concluding that there is a time limit for making an adjustment under reg. 38 when there is no such limit (Ground 1) and this error had led the FTT to conclude incorrectly that the 2017 Letter was not an appealable decision which, in turn, resulted in the FTT incorrectly striking out the appeal;
- the FTT had failed to give effect to the overriding objective in r. 2 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273) (the FTT Rules) when deciding whether to exercise its discretion to permit BBL to amend its grounds of appeal, so as to constitute a (late) appeal against the 2012 Decision; and
- the FTT should have used the checklist of matters in the original rule 3.9 of the Civil Procedure Rules (CPR). BBL had made written submissions using that checklist, which the FTT had failed to take into account.
The UT held that Grounds 2 and 3 disclosed no error of law in the FTT's decision. Also, the UT was not satisfied that there was any error of law of the kind set out in Ground 1, as the FTT's conclusions on time limits applicable to reg. 38 did not form part of its core reasoning. Even if the FTT had reached an incorrect conclusion on time limits for reg. 38, the FTT's decision would inevitably have been the same, because BBL's appeal had to be struck out, since it did not concern an appealable decision.
Thus, BBL's appeal was dismissed.
The VAT treatment of bingo is complex. The fee, which is paid by a player for a session, is divided into two components for each game. The first is the participation fee, which is attributed to the supply of the game to the player and which is subject to VAT. The second is the stake money, which contributes to the cash paid to the winner and which is not subject to VAT. The value of each component varies from session to session according to the number of players. Also, it varies because the promoter may decide on the prize money only at the start of a session, once he has reviewed the ticket sales, although that the amount is usually similar to that selected for the same session during the previous week. The prize money may not be directly related to the number of participants. There may be a guaranteed minimum for some, or all, games. Thus, if too few customers play in one game, the promoter may have to top up the prize money from the general pool of participation fees in the session. The VAT payable varies depending on whether it is assessed on a game-by-game, or session, basis. Due to this complexity, it is not surprising that this dispute has been spread over so many years. After being advised by the accountants KPMG, BBL had had the chance to appeal some years previously, but failed to do so.
[1] The appellant company (“BBL”) carries on business as a bingo operator. In a decision released on 8 May 2018 (the “Decision”), the First-tier Tribunal (Tax Chamber) (the “FTT”) made the following two decisions:
- It concluded that the FTT had no jurisdiction to consider the appeal that BBL was purporting to make, largely because a letter that HMRC sent BBL on 5 January 2017 did not contain any appealable decision. Therefore, the FTT struck out BBL's appeal.
- It concluded that HMRC had made an appealable decision in a letter dated 3 July 2012 that they sent to BBL. The FTT refused BBL permission to amend its grounds of appeal so as to appeal against that decision letter because the relevant deadline for making an appeal had long since passed and the FTT was not prepared to grant BBL an extension of time.
[2] BBL now appeals to this Tribunal against the Decision. References in this decision to numbers in square brackets are to paragraphs of the Decision unless the context otherwise requires.
[3] There was no challenge to the FTT's finding of facts.
[4] Underlying this appeal is a dispute between HMRC and BBL as to BBL's VAT liability relating to its bingo business. A similar dispute is the subject of litigation in Advocate General representing for R & C Commrs v K E Entertainment Ltd [2018] BVC 53 in which the Inner House of the Court of Session has found in favour of HMRC, but permission to appeal to the Supreme Court has been granted.
[5] The nature of the dispute is best understood by reference to the following extract from the decision of the Inner House of the Court of Session in K E Entertainments:
[8] For all its simplicity, bingo has a Value Added Tax regime of some complexity. The fee, which is paid by a player for a session, requires to be divided into two components for each game. The first is called the participation fee, which is that part attributed to the supply of the game to the player. It is subject to VAT. The second is the stake money; being the part said to contribute to the cash prize paid out to the winner. This is not subject to VAT. A problem arises because the value of each component can vary from session to session according to the number of players. It varies also because the promoter may only decide on the prize money at the start of a session, once he or she has reviewed the ticket sales; albeit that the amount is likely to be similar to that selected for the same session during the previous week. The prize money may not be directly related to the number of participants. There may be a guaranteed minimum for particular, or all, games. The promoter may therefore require to top up the prize money, where there is a dearth of custom, in respect of one game from the general pool of participation fees in the session.
[9] The amount of VAT payable will vary, depending upon whether it is assessed on a game by game or session basis. If it is the former, the calculation is relatively straightforward, since the level of the participation fee for each game will have been decided at the start of the session. The VAT will be the sum of that element multiplied by the number of players. This is so even if the participation component might theoretically have been reduced, if the prize money required to be topped up. If it is the latter, the total prize money paid out during a session is deducted from the gross receipts for that session in order to calculate the participation fees upon which VAT is levied. The contribution to the VAT exempt prize or stake money is higher and hence the VAT payable is lower. It is the mode of assessment, and by whom and how it is determined, which lies at the heart of the appeal.
[6] The dispute between BBL and HMRC (and indeed that between K E Entertainments Limited and HMRC) arose because HMRC changed their policy and required taxpayers to account for VAT on a session basis, instead of a game by game basis. That brought into focus all the complexities referred to above and BBL concluded that, even though calculating VAT on a session basis could not alter the total sums that it received from its customers, it did reduce the...
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Buckingham Bingo Ltd v The Commissioners for HM Revenue and Customs
...[2019] UKUT 0140 (TCC) Appeal number: UT/2018/0074 VALUE ADDED TAX – Whether taxpayer appealing against appealable decision – no – whether extension of time should be granted to permit a late appeal against a previous appealable decision – no – taxpayer’s appeal dismissed UPPER TRIBUNAL (TA......