Feehan v Commissioners of Customs and Excise

JurisdictionEngland & Wales
Judgment Date04 November 1994
Date04 November 1994
CourtQBD (Crown Office List)

Queen's Bench Division (Crown Office List).

Hidden J.

Feehan
and
Customs and Excise Commissioners
Customs and Excise Commissioners
and
Feehan

Robin Mathew QC (instructed by Percy Short & Cuthbert) for the taxpayer.

Michael Kent (instructed by the Solicitor for Customs and Excise) for the Crown.

The following cases were referred to in the judgment:

Becker v Finanzamt Münster-Innenstadt (Case 8/81) [1982] ECR 53

BLP Group plc v C & E Commrs VAT[1993] BVC 279

Bulmer (HP) Ltd & Anor v J Bollinger SA & OrsELR[1974] Ch 401

CILFIT (Srl) & Anor v Ministry of Health (Case 281/81)[1982] ECR 3415

Glawe (HJ) Spiel- und Unterhaltungsgeräte Aufstellungsgesellschaft mbH & Co KG v Finanzamt Hamburg-Barmbek-Uhlenhorst VAT(Case C-38/93) [1994] BVC 242

Internationale Handelsgesellschaft mbH v Einfuhr- und Vorratsstelle für Getreide und Futtermittel (Case 11/70) [1970] ECR 1125

R v Ryan & Ors VAT[1994] BVC 96

R v Pharmaceutical Society of Great Britain, ex parte Association of Pharmaceutical Importers UNK[1987] 3 CMLR 951

Rheinmühlen-Düsseldorf v Einfuhr- und Vorratsstelle für Getreide und Futtermittel (Case 166/73) [1974] ECR 33

Stichting Uitvoering Financiële Acties (SUFA) v Staatssecretaris van Financiën VAT(Case 348/87) [1991] BVC 102; [1989] ECR 1737

Value added tax - Gaming machines - Whether takings from gaming machines exempt - Whether imposition of VAT incompatible with Community law - Whether reference to be made to Court of Justice of the European Communities - Value Added Tax Act 1983, s. 13(1), Sch. 6, Grp. 4, item 1, Note (1)(d) (replaced by Value Added Tax Act 1994 section 23 subsec-or-para (1) schedule 9 group 4Value Added Tax Act 1994, s. 23(1), Sch. 9, Grp. 4, item 1, Note (1)(d)); sixth VAT directive 77/338 of 17 May 1977 (OJ 1977 L145/1),eu-directive 77/388 article 13(B)(1)art. 13(B)(f).Value added tax - Value of supply - Gaming machines - No facility for machines to pay out winnings automatically - Winnings claimed from establishment where machine situated - Whether value of supply total takings or total takings less amounts paid out in winnings - Value Added Tax Act 1983, s. 13(2) (replaced by Value Added Tax Act 1994 section 23 subsec-or-para (2)Value Added Tax Act 1994, s. 23(2)).

This was an appeal by the taxpayer, seeking a reference to the European Court of Justice, against a decision of the London VAT tribunal ((LON/92/1443) No. 10,154; [1993] BVC 1568) that VAT was properly payable on a supply of services by the operator of gaming machines. Customs cross-appealed against the tribunal's decision that the value of the supply was the amount of the stake money taken less winnings paid out.

The taxpayer operated "video poker games" in bars and public houses. Games were played by inserting a coin into the machine but there was no provision for any pay out of winnings by the machine. If the machine recorded a win the player could either continue to play without inserting further coins or could claim his winnings from the barman or other person in the establishment where the machine was installed.

The relevant domestic legislation was the Value Added Tax Act 1983, s. 13(1) which provided that a supply of services was to be treated as made to a person playing a game of chance by means of a gaming machine, while Sch. 6, Grp. 4, which exempted the provision of facilities for the placing of bets or the playing of games of chance also, by Note (1)(d), excepted the provision of gaming machines from the exemption.

The taxpayer contended that the UK legislation was incompatible witheu-directive 77/388 article 13(B)(1)art. 13(B)(f) of the sixth directive which provided that "betting, lotteries and other forms of gambling, subject to conditions and limitations laid down by each member state" should be exempt.

If the imposition of VAT on the takings from gaming machines was permitted by the sixth directive, the taxpayer contended that Note (1)(d) to the Value Added Tax Act 1983, Sch. 6, Grp. 4 provided that the exemption in item 1 did not include "the provision of a gaming machine". The provision of a gaming machine was different from the winnings from a gaming machine which were not excluded from the exemption with the result that Note (1)(d) extended only to the actual supply of a machine, not to the proceeds of the machine.

On their cross-appeal Customs contended that the value of the consideration was the gross amount of money inserted into the machines without deducting the sums paid out as winnings. They drew a distinction between the case where the winnings were paid out by the machine itself and where the machine merely recorded a win which had to be claimed from the establishment. These machines, it was said, were amusement machines rather than gaming machines, and any money won was the result of a side bet between the player and the publican.

Held, refusing to refer a question to the Court of Justice, dismissing the taxpayer's appeal and dismissing Customs' cross-appeal:

1. eu-directive 77/388 article 13(B)(1)Article 13(B)(f) of the sixth directive permitted the imposition of VAT on the provision of gaming machines by member states. The words "subject to conditions and limitations laid down by each member state" were apt to include the exception from exemption of the operation of gaming machines. Moreover, since the operation of gaming machines was subject to VAT in five member states, it must be regarded as obvious to the courts of the member states and to the Court of Justice that such a course was permitted by the sixth directive (judgment of the Court of Justice in CILFIT (Srl) & Anor v Ministry of Health (Case 281/81) [1982] ECR 3415 at para. 16 applied and R v Ryan & Ors VAT[1994] BVC 96 followed).

2. The fact that the same point had been decided by the Court of Appeal did not preclude a reference by a lower court (judgment of the Court of Justice in Rheinmühlen-Düsseldorf v Einfuhr- und Vorratsstelle für Getreide und Futtermittel (Case 166/73) [1974] ECR 33 at para. 5 applied).

3. The words "provision of a gaming machine" in Note (1)(d) to Grp. 4 of Sch. 6 to the 1983 Act included the provision of facilities to players. The words could not be restricted to the physical supply of a gaming machine.

4. On the cross-appeal, the Value Added Tax Act 1983, s. 13(2) was relevant in determining the value of the supply which was to be determined as if the consideration (that is the stake money) for the supplies were reduced by an amount equal to the amount received by persons playing successfully. The value of the supply was therefore to be reduced by the amount paid out in winnings.

JUDGMENT

Hidden J: The appellant Mr Feehan appeals against the decision of the London VAT tribunal given on 2 December 1992 on the grounds that the chairman, Mr D C Potter QC, erred in law. The notice of motion states that Note (1)(d) of Grp. 4 of Sch. 6 to the Value Added Tax Act 1983 is outwith the conditions and limitations permitted by and does not conform with eu-directive 77/388 article 13(B)(1)art. 13(B)(f) of the sixth VAT directive (Directive 77/388 of 17 May 1977) which has direct effect. The sixth directive was issued pursuant to art. 189 of the EC Treaty.

Mr Mathew, for the appellant, seeks a reference to the Court of Justice of the European Union of questions, of which the first is:

In the case of gaming machines offering the possibility of winnings (whether such are paid out by the machine or not)...

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