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Latest BACTA news
15 February 2010
BACTA meets with Minister to discuss the taxation of SWPs
After Leslie MacLeod Miller and BACTA members met with Sarah McCarthy-Fry on Friday, we wrote to her to summarise the key issues. The letter is set out below:
Dear Minister
Thank you to you and your officials for making time to meet on Friday in your constituency. I am aware that you indicated that you would be contacting us early this week to advise us of the next steps, however, in order to assist you and your officials I would like to make the following observations.
- We recognise HMRC’s obligation to collect and protect revenue, however, the announcement which was made by HMRC in December 2009 represents a change of policy in the treatment of a variety of games which have been operated for many years with longstanding and accepted practice by HMRC and the industry that AMLD was not payable.
- There are two issues. (1) whether the legal interpretation by HMRC that these games are ‘presented as involving an element of chance’ is correct in law and (2) even if it is correct in law, whether arrears can be collected because of the legitimate expectation which has arisen through express and implied action by HMRC.
- As for the first issue, we do not believe that HMRC’s legal interpretation is correct. As we have already indicated, we are willing to provide you with the social law opinion which we have had. Can you please confirm that HMRC’s external legal opinion will be made available to us.
- Even if HMRC’s legal interpretation is correct, (and we believe we can demonstrate it is not), we note that HMRC accepts that public notice 454 (October 2007) may give businesses an expectation that ‘quiz games played on a machine will not require an AMLD licence’. As such, HMRC will not seek to collect any arrears to tax which may be due in law in relation to a quiz game played on a machine and therefore question and answer games such as Monopoly and Cluedo will not be subject to arrears.
- It should be noted however that HMRC currently appears only to recognise that it is in relation to quiz games where it is effectively estopped due to its longstanding custom and practice. This may be because we specifically highlighted this part of the notice as an example of misdirection. We must make it clear that this legitimate expectation concerning HMRC’s treatment of games which have been categorised as SWPs is broader than quiz games, but extends to reaction, perception and logic games. We believe that we can produce evidence of HMRC’s misdirection and misunderstanding in relation to a variety of SWP games, including games such as skill ball bingo which we understand to be the subject of HMRC’s intended action. This evidence all stems from the historical position which is that the industry has always worked hard to ensure that its SWP machines were accepted as such by the Gaming Board / Gambling commission. The recent VAT / AMLD changes indicate that their aim was to match the social legislation (see 8 below) and Notice 454 refers taxpayers to both the Gambling Commission and BACTA.
- While we are aware that quiz games such as Monopoly and Cluedo and reaction games such as skill ball bingo are purported to fall within HMRC’s change of policy, we would be grateful if HMRC would confirm precisely which games they believe they intend to treat as gaming machines for the future in order that we can demonstrate those games to HMRC and that we may make representations regarding legitimate expectation in respect of arrears. When we have this confirmation we can make our representations and arrange demonstration as appropriate.
- We specifically request that no further announcement is made until we have had an opportunity to make representations based upon the clarifications and information exchange that we are seeking. In particular any announcement must not deal solely with quiz games, but clearly must address non quiz games which have been the subject of longstanding custom and practice.
- We wish to work with HMRC and the Gambling Commission to ensure that the test for whether or not a game is characterised as an SWP is clear and unambiguous. We believe that the test for whether or not a game is ‘presented as involving an element of chance’ must be included in these characteristics and should be properly focused upon whether the player believes that they are involved in an activity equivalent to playing a gaming machine. This is an approximation of the test which has been adopted by the social regulator and as the VAT order (2005) stated that the aims of the changes to legislation were to align tax and social law definitions, we see no justification or a divergent approach. HMRC’s BN62 in March 2006 clearly reflects that there was no intention to capture additional machines other than Section 16/21 and FOBTs within the existing AMLD net and if the intention was to mirror social law, we understand that the Gambling Commission had no issue with the status of the overwhelming majority of these games.
- We acknowledge that this clarification may take some time to agree and we would suggest that a transitional period e.g. 6 months could be implemented to agree the appropriate voluntary disclosures in relation to machines that appear to the player to involve an activity equivalent to that of playing a gaming machine.
- We understand that a further meeting is proposed soon in London and we suggest that at that meeting we agree a realistic timetable for taking this issue forward.
Kind regards
Leslie MacLeod Miller
Chief Executive
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