The Commissioners for HM Revenue and Customs (“HMRC”) v London Clubs Management Ltd

JurisdictionEngland & Wales
JudgeLady Justice Gloster,Lord Justice Leggatt,Lord Justice Flaux
Judgment Date09 October 2018
Neutral Citation[2018] EWCA Civ 2210
CourtCourt of Appeal (Civil Division)
Docket NumberCase No: A3/2016/3101
Date09 October 2018

[2018] EWCA Civ 2210




[2016] UKUT 259 (TCC)

Royal Courts of Justice

Strand, London, WC2A 2LL


Lady Justice Gloster

Lord Justice Flaux


Lord Justice Leggatt

Case No: A3/2016/3101

The Commissioners for her Majesty's Revenue and Customs (“HMRC”)
London Clubs Management Limited

George Peretz QC and Elizabeth Wilson (instructed by the General Counsel and Solicitor to the Revenue and Customs) for the Appellants

Andrew Hitchmough QC and Barbara Belgrano (instructed by BDO LLP) for the Respondent

Hearing date: 20 March 2018

Judgment Approved by the court for handing down

Lady Justice Gloster



This is an appeal by The Commissioners for Her Majesty's Revenue and Customs (“HMRC”) against the decision of the Upper Tribunal, Tax and Chancery Chamber (Henderson J and Judge Berner) (“the UT”), released on 2 June 2016 (“the judgment”) 1 allowing the appeal of London Clubs Management Limited (“LCM”) against the decision of the First-tier Tribunal (Judge Sinfield) (“the FTT”), released on 27 November 2014 (“the FTT judgment”) 2.


The case raises an important point of principle concerning gaming duty, namely the interpretation of section 11(10)(a) of the Finance Act 1997 (“ FA 1997”). The issue in the appeal is the pure point of law as to whether a player who places a bet in one of LCM's casinos using either a free bet voucher, or a non-negotiable chip (referred to collectively, both in this judgment and by the UT, as “Non-Negs”), has staked “value, in money or money's worth” with the casino, within the meaning of section 11(10)(a) of the FA 1997. This issue is relevant to LCM's liability to gaming duty in respect of Non-Negs that are lost to (or otherwise retained by) LCM as banker.


The UT held that the “value, in money or money's worth”, staked by a player staking a Non-Neg, was nil. This was on the grounds that:

“…both the legislation itself and the authorities support the argument that the value of the stake staked is the amount which is put at risk by the player when staking the stake. That amount is the real amount of money or money's worth that is risked in the game”. See [26] of the judgment.

The UT's reasoning was, in essence, that since the Non-Negs (unlike ordinary cash chips) did not represent money deposited with the casino, could not be redeemed for goods or services to a monetary value, and could not be assigned for value, the value put at risk when staking a Non-Neg was zero: see [35] of the judgment. Accordingly, the UT reversed the decision of the FTT which had concluded at [29], that the objectively ascertained value, for the purpose of section 11(10)(a), of a chip staked as a stake in a casino game was the face value of the chip, and that it was irrelevant whether a stake staked was given to the player free of charge.


Since gaming duty is (in essence) assessed on the difference between total stakes and total prizes, the effect of the UT's ruling is to reduce the gaming duty payable by casinos. The point of principle therefore affects all UK casinos that offer Non-Negs to gamblers to induce them to gamble in their casinos.


The court was informed that the practice of offering Non-Negs is sufficiently widespread for a total of at least £11.1 million in tax to be known to be at stake in relation to past periods as a direct result of the UT's decision. We were also informed that, if the decision stands, there will be substantial implications for tax collection in future, not least because the favourable tax treatment of Non-Negs as a result of the

judgment will encourage casinos to offer Non-Negs in place of other types of rewards and inducements (such as the use of cash inducements, as discussed below).

The factual background


There was no dispute about the facts. They are summarised at [3] – [10] in the FTT judgment which the UT also explicitly adopted in its judgment. In order that this judgment may be self-standing, I quote the UT's summary as it appeared at [3] – [8] of its judgment:

“The facts

3. The facts can be shortly stated. There was no dispute in that respect in the FTT, and the FTT summarised the position at [3] to [10] of its decision.

4. As a promotional tool, LCM provides selected customers with a range of means of placing bets free of charge. Those means, non-negotiable chips and certain vouchers collectively called free bet vouchers, are described by the FTT at [6] to [10]. There are certain differences between them, but it was not suggested that those were material to distinguish one from another for the purpose of this appeal.

5. As the FTT described the position at [6] to [7], non-negotiable chips are similar to normal cash gaming chips (“cash chips”) which are either purchased for cash at the gaming tables or won by customers on a winning bet. Non-negotiable chips are used to place bets at the gaming tables in the same way as cash chips. Like cash chips they are replayable until lost. If a player places a bet with non-negotiable chips and wins, the banker pays out the winnings in cash chips and the player retains the non-negotiable chips to place further bets. When such a player loses, the banker takes the non-negotiable chips and places them in the table's “drop box” as the FTT described at [7].

6. Whilst non-negotiable chips are similar to cash chips, there are differences. First, of course, the non-negotiable chips are not purchased for cash, but are provided free of charge. Secondly, a non-negotiable chip can only be used to place a bet at the gaming tables; unlike a cash chip it cannot be encashed or used to pay for goods and services. Thirdly, there are certain physical differences which enable a non-negotiable chip to be distinguished from a cash chip.

7. Apart from “free gaming chips vouchers”, which are exchangeable for non-negotiable chips at the casino's cash desk without charge, free bet vouchers are similar to non-negotiable chips in that they may be used to place a bet at the tables. “Free play vouchers” and “replayable vouchers”, whilst subject to terms and conditions such as in relation to the games capable of being played, the types of bet and what prizes might be won, are the same, in playing terms, as non-negotiable chips, the only difference being the use of the voucher instead of a chip. Other free bet vouchers, namely “one-hit” vouchers and “cash match” vouchers are different in that, unlike the non-negotiable chips, they may not be replayed even after a winning bet. Those vouchers are placed in the drop box irrespective of whether the bet with them has won or lost.

8. We refer, as did the FTT, to the non-negotiable chips and free bet vouchers collectively as “Non-Negs”. Although it was not argued that there should be any distinction drawn between them, we should just interpose at this stage that it did not appear to us that the free gaming chips vouchers should have been included in the same category as other Non-Negs. As we shall describe, the relevant element of the banker's profits by reference to which the charge to gaming duty arises requires the value of the “stakes staked” to be taken into account. In contrast to the other Non-Negs, free gaming chips vouchers are not used in the game itself, nor do they end up in the drop box; it is the non-negotiable chips into which those vouchers may be exchanged which are used in the game and which, on a losing bet, are placed in the drop box.”

The relevant statutory provisions


Gaming duty is an excise duty that was introduced with effect from 1 October 1997. So far as material, section 10(1) of the FA 1997 provides:

“… a duty of excise (to be known as ‘gaming duty’) shall be charged in accordance with section 11 below on any premises in the United Kingdom where gaming to which this section applies (‘dutiable gaming’) takes place on or after [1 October 1997].”


Until 27 April 2009, section 10(2) provided:

“(2) … this section applies to gaming by way of any of the following games, that is to say, baccarat, punto banco, big six, blackjack, boule, casino stud poker, chemin de fer, chuck-a-luck, craps, crown and anchor, faro, faro bank, hazard, poker dice, pontoon, French roulette, American roulette, super pan 9, trente et quarante, vingt-et-un, and wheel of fortune.”


With effect from 27 April 2009, instead of listing the relevant games by name, section 144(3) of the Finance Act 2009 amended section 10(2) of the FA 1997 to provide:

“Subject as follows, this section applies to—

(a) casino games, and

(b) equal chance gaming.”

“Casino games” are defined by section 15(3) as “games of chance which are not equal chance gaming”; and “equal chance” is defined as:

“gaming which does not involve playing or staking against a bank (however described, and whether or not controlled or administered by a player) and in which the chances are equally favourable to all participants …”.

The claim period in this case spans the change in legislation but nothing turns on the changed terms. It is not in dispute that the gaming at issue in this appeal is within the scope of section 10 and is dutiable gaming.


Section 11 of the FA 1997 sets out the rate of gaming duty. It is not necessary to set out the rates, which are subject to change, but section 11 otherwise relevantly provides:

“(1) Gaming duty shall be charged on premises for every accounting period which contains a time when dutiable gaming takes place on those premises.

(2) … the amount of gaming duty which is charged on any premises for any accounting period shall be calculated, in accordance with the following Table, by—

(a) applying the rates specified in that Table to the parts so specified of the gross gaming yield in that period from the premises; and (b)...

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