Out-Law / Your Daily Need-To-Know

Sportech eligible for VAT rebate on 'spot the ball' competition after court ruling

05 May 2016, 4:51 pm

'Spot the ball' competitions can be classed as games of chance and therefore businesses running those competitions do not need to pay VAT, the Court of Appeal in London has ruled.

The Court overturned a ruling by the Upper Tax Tribunal which had favoured arguments made by HM Revenue and Customs (HMRC) in a long-running dispute with pools betting company Sportech. The Upper Tribunal had accepted HMRC's appeal against an earlier judgment by the First-tier Tax Tribunal which had ruled in Sportech's favour in the case.

A 'spot the ball' competition involves inviting consumers to identify the likeliest position for a ball which has been removed from a photograph, in return for a potential prize.

In its ruling the Court of Appeal said that the First-tier Tax Tribunal had "made no error of law" when it determined that spot the ball competitions can be classed as a 'game' despite the fact there is no "inter-player interaction".

Under the Value Added Tax Act the provision of any facilities for the placing of bets or the playing of any games of chance is exempt from VAT.

The definition of game of chance referred to in the decision stems from the Gaming Act. The term does not apply to any "athletic game or sport" but instead generally refers to "a game of chance and skill combined and a pretended game of chance or of chance and skill combined". In determining whether a game is a game of chance and skill combined "the possibility of superlative skill eliminating the element of chance shall be disregarded", according to the Act. Similar wording appears in the Gambling Act 2005.

In a statement Sportech said it was "pleased" by the ruling. The company stands to win a £97 million VAT repayment from HMRC in respect of the spot the ball competition it ran, although it is open to HMRC to apply for permission to appeal the decision before the Supreme Court. HMRC has until 13 May to make such an application to the Court of Appeal.

HMRC said it is "disappointed with the decision" and is "carefully considering the judgment".

The decision in the case could influence whether the Gambling Commission views 'spot the ball' competitions as games of skill or chance, and could therefore impact on the way such games are regulated.