Supreme Court Declines Tax Appeal Of Bingo Club Operator

Published: 25/06/2020

Reading Time: 3 Min

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An operator of the bingo club seeks to reclaim VAT that it paid before the upgradations made by HMRC in its process of fees calculation. Recently, the operator loses this appeal to the Supreme Court in the UK.

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UK VAT Regulations And Change in Laws

The Principal VAT Directive of November 28, 2006, still follows in the UK. It develops a prevailing system of VAT for the state members of the EU union. The major UK legislation is the VAT regulations of 1995 and the VAT act 1994.

The current dispute has emerged from an amended regulation provided by HMRC about the calculation of contestants’ fees. Before 2007, the regulations stated that bingo organizers must calculate the participation fees individually for each game. In February 2007, HMRC imposed Business Brief 07/07 which implied that the fees of contestants should be calculated based on the session by session. They find it to be more propitious for the organizers than game by game basis as it generated a low taxable amount.

In business brief, the organizers of bingo who have calculated due tax on session charges and participation based on the game by the game may claim to HMRC. The claim can be made for repayments of additional VAT paid by the organizers as a result of following prior tax rules. The repayment claims are subject to the conditions intended in Notice 700/45.

It enlists general rules that imply a claim was subject to a restricted time of three years. This limit had a juridical basis as per section 80 of the VAT Act.

Until 2007, the bingo organizers accounted for VAT based on the game by game. After the emergence of the business brief, the taxpayer appealed for repayment under section 80 of the VAT Act.

In light of that case, the appellant in the recent dispute seeks to make an adjustment of tax £435,630.40 for years ranging from 1996 to 2004. HMRC declined to accept the changes and instead stated that by considering the rules of its prior notices, the taxpayer had made a mistake before which could be corrected under section 80.

Reasons Behind The Judgment

The taxpayer faced the challenge in terms of the time limit under the VAT act. To avoid the time limit, the taxpayer contended that tax paid based on the game by the game from 1996 to 2004 was due to HMRC. The taxpayer also contended that both games by game and session by session system are the legitimate process of calculation and it was a tax that was unpaid.

The judge of the UK Supreme court, Lord Leggatt disagreed. According to him, there is only one process of calculating the taxable amount and that was a session by session system. In the current scenario, the fact cannot be denied about the contestant that participated in the bingo.

There is no justified reason for looking at the pricing policies which were followed before 2007 and considered by the taxpayer. Instead of using the session by session system, if the taxpayer had used the current system and paid additional VAT to HMRC from 1996 to 2007, then the taxpayer would need to pay no due.

This was enough to justify the operator’s appeal. The judge also declined a further argument that was about the Principal VAT Directive and its associated regulations. These rules are imposed only when there is a modification in the consideration. And it is acknowledged by the appellant, not in the method that was followed to calculate the tax amount.

The judge also observed that around 14 such cases were pending and with an overall value from 30 to 40 million pounds.