The tax case on appeal against the Upper Tribunal for Tax ("UT") with leave to appeal a decision from the First Tier Tax Tribunal (FTT) raised a crucial point of principle regarding a crucial matter that concerned the gaming industry and the Commissioners for Her Majesty's Revenue and Customs Tribunal ("HMRC"). HMRC applied for a curial determination of an interpretation of the Finance Act of 1997 ("FA 1997") specifically s11(10)(a) where UT held Non-negotiable chips ("Non-negs") did not represent money deposted into the casino and may not be redeemed for monetary value or goods or services; the value put at risk when staking a Non-Neg was zero. The UT decision contradicted the the conclusions of FTT who claimed a Non-Neg staked had face value and aligned with s11(10)(a) of the FA1997, the staked value was 'in money or money's worth'; and it was irrelevent whether a stake staked was offered free of charge.

Upper Tribunal's reduction ruling dismisses staked face value chip

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HMRC's grounds of appeal were that UT erred in law by misconstructing the section and it misapplied two cases it cited*. It wrongly held the value of a Non-Neg was the encashment value of the stake staked ex post facto the game [agreed to be nil] rather than the cash or monetary value of the stake staked. The UT also erred in law by misconstruing s29(3) and (4) of the Betting and Gaming Duties Act 1981 ("BGDA1981"]. UT held inter alia that a 'stake' was simply the stake in the casino game with a face value. Stakes were afforded the same chance in winning and were entitled to the same economic benefits as playing a chip and the reading of statute was consistent with the provision of enabling a numerical calculation of the banker's profits. It would be unrealistic to value a Non-Neg at zero merely due to its having no encashment value. The Statute intention was that face value was the correct value which was the critical wording 'in money or money's worth'. In a game a Non-Neg was as good as cash. HMRC claimed UT had restated the fact that Non-Neg was a voucher, which was unable to engage s20(4)(b) of BGDA1981 and prizes or winnings should be valued at face value. HMRC's submissions pertained inter alia to the above cited cases stating a real world valuation of a stake was required e.g. the consequences to the player's pocket, such as when a player lost a 100 pound chip, it was lost in a very real sense whereas the Non-Neg could be used only as a stake. The learned Lady Judge traversed inter alia issues such as interpretation of 'value' or 'money's worth' and the gross gaming yield aligned with s11(2)(a) FA1997 was ascertained as a real world yield via gaming receipts and banker's profits, envisaged by tax law as a charge duty on profits. Real-world stakes received from players precluded notional or artificial values placed on tokens handed out as part of promotional material which intrinsically had no value nor were they negotiable. A Non-Neg chip permitted a player to bet with casino money and in the event the chip was placed as a winning bet it was counter-intuitive to categorise an item of the casino's own money, as a banker's profit or as a stake. Such a stake had no objective value. The Aspinall's case had argued for commission paid under the separate commission agreements that reduced the overall value of the stakes. The face value of a Non-Neg was the amount used in calculating winnings or value of the prize that the player who made the stake received, was successful. Non-Negs therefore were clearly not 'the same as money'; it was not cash neither was it a chip. A loss of a Non-Neg was merely loss of the right to use it and no calculations were required for profit purposes. The appeal was dismissed.
Briefly summarised

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Vide The Commissioners for Her Majesty's Revenue and Customs v London Clubs Management Limited, [2016] UKUT 259 (TCC); [2018] EWCA Civ 2210; Case A3/2016/3101; *Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 and Aspinalls Club Ltd v Revenue and Customs Commissioners, both Upper Tribunal [2012] STC 2124, Court of Appeal [2014] STC 602; Company Law Today comments - hypothetically speaking - tax liability could easily have reached eleven million [UK] pounds and there must be at least fifty-five million pounds of Non-negotiable chips or gift vouchers issued in the gaming industry at any given time.