“…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”
“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”
“… 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 ].”
“(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.”
“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 value concept in section 11(10)(a) assumes an objective ascertainment of value, rather than one derived either from a perception of value to the player, or value to the banker”; see the judgment of the UT in Aspinalls at [35]. The FTT did not consider that Moses LJ in the Court of Appeal in Aspinalls was applying anything other than a similarly objective assessment of value when he held at [8] that: “The value in money or money’s worth of the stakes staked is the face value of the chip. Staking a chip is the same as staking money and the value in money of the chip is its face value […] The stake is the amount risked in connection with the game; it is the value of that stake which is put at risk in the game. The value put at risk in the game is not altered by reference to any commission the player receives under the cash chip agreement.”
“(i) Although the meaning and effect of section 11(10)(a) FA was considered by the Court of Appeal in Aspinalls, that was in the context of a collateral incentive scheme which did not alter the fact that the casino customer was using chips which had a negotiable value equal to the face value of each chip. The customer was therefore putting that amount at risk in placing his bet and the reference by Moses LJ to the value in the money of the chip being its face value has to be read in that context. (ii) The present appeal raises the question of valuation in a different context; that of a free or non-negotiable chip which is obtained at no cost to the customer; has no redeemable value; but if used to place a successful bet will be honoured at its face value. Given that the Upper Tribunal thought fit to express a view also about section 11(10)(b) andsection 20(3) of the Betting and Gaming Duties Act 1981 (“BGDA 1981”), it seems to me important that these points should be considered collectively by the Court of Appeal.”
“gambling with chips is not merely gambling for money but, in substance, with money”. ii). HMRC’s diamond necklace example was misconceived. The value of the necklace would be a matter of agreement between the player and the casino before it was staked. That meant that, practically speaking, the necklace would be exchanged for cash chips which would then be used in the casino just like any other cash chips. The player would therefore be staking real money which would match the face-value of the chips. Non-Negs, however, were a different kettle of fish. iii). The UT’s assessment of Aspinalls could not be faulted. Moses LJ clearly had in mind a real-world valuation exercise when he referred to the value put at risk in the game. It was nonsense for HMRC to say that, in substance, staking a Non-Neg was the same as staking money. iv). Whilst permission to appeal was granted by Patten LJ inter alia on the grounds that Aspinalls CA raised the question of valuation in a different context, there was no reason why the present context should lead to a different approach to valuation. The decision of the UT was wholly consistent with both Lipkin Gorman and Aspinalls. The UT’s approach was also consistent with the common ground in Lydiashourne (VAT & Duties Tribunal Decision E00092 of13 August 1998 , upheld on appeal by the High Court (Lloyd J) [2000] V & DR 127.) The UT stated at [42] that it had derived no assistance from Lydiashourne, but noted that its own conclusion was nevertheless consistent with it. In Lydiashourne, the issue was whether forged bank drafts had been accepted by the casino as absolute payment for the gaming chips for which they had been exchanged. If they had been, as the forged drafts were inherently worthless, it was common ground that the chips for which they had been exchanged were equally worthless (irrespective of their face-value.) The Tribunal recorded: “…if the forged cheques were accepted in absolute satisfaction of any initial loan which was thereby extinguished then no value was in fact given for the issue of the chips and they did not constitute stakes for money’s worth.”
“a form of private legal tender carrying the casino’s promise that, when presented at the desk at the end of a session, it will be exchanged for cash (or other monetary credit) in the amount stated on its face.”
“32. It is important to have regard to what is required to be valued by s 11(10)(a). It is the “stake staked”, and not the chip or voucher or anything else. For a cash chip, therefore, what is being valued is not the chip, but the money which is the real stake. That money is taken into account gross, without any deductions such as those at issue in Aspinalls. Likewise, a cash chip which is given by the player who has deposited the cash represented by it to another player, and which can be redeemed for money, represents that money when it is staked on a game. It is the same if what is provided free of charge to a player is something which, whilst not representing a deposit of money, nonetheless has a value in money by being redeemable for money or in money’s worth by being redeemable for goods or services to a monetary value. 33. We do not regard as anything to the point that the Non-Neg might provide the player with a right to play a game, or a right to have the chance to win, or a promise from the club in those respects, which Ms Wilson argued was a valuable right. The mere fact that such a right might subjectively be regarded by the holder of the Non- Neg as a valuable right, in the sense that it would enable that holder to play a game without putting money at risk, is not material to an objective valuation, in money or money’s worth, of the stake staked. 34. On the other hand, the objective valuation of a stake would, in our view, have to have regard to the monetary value, if any, that could be obtained on an arm’s length assignment to a third party of the right to place that stake, in the same way that it would if the Non-Neg was redeemable for cash or for goods and services. That would be money’s worth for the purpose of s 11(10)(a). It was not, however, HMRC’s case that the stakes of the Non-Negs should have any value other than the face value of the Non-Negs, and there were no findings of fact either that the Non-Negs were transferable or, if they were, what value might be realisable on a transfer. Furthermore as s 11(10)(a) requires the individual stake to be valued, there would have to be evidence of a value generally obtainable in a market in Non-Negs or evidence that a particular Non-Neg could have been, at the time it was staked, assigned for money or money’s worth. In the absence of such evidence, it is not possible to ascribe any money’s worth to the stake by reference to any assignable right. 35. It follows, in our judgment, that the FTT erred in law when it concluded, at [27], that the value, in money or money’s worth, of a Non-Neg was its monetary face value, on the basis that the face value would be used to calculate winnings in cash chips and on a losing bet the player would no longer have the right to bet that monetary value for free. In our view, the FTT failed to have proper regard to the requirement that the value in s 11(10)(a) must be a value in money or money’s worth. On the true construction of that provision, the stakes staked by the Non-Negs did not represent any money paid or deposited with LCM, nor did they have any value in money’s worth by reason of being redeemable in money or for goods or services to a monetary value or, on the evidence, otherwise assignable for money or money’s worth. Consequently, for the purpose of s 11(10)(a), the stakes staked by the Non-Negs have no value in money or money’s worth.”
“43. The appeal was argued before us on the basis of LCM’s submission (which we have accepted) that the Non-Negs are to be regarded as having no value for the purpose of s 11(10)(a) FA 1997. LCM’s claim in this respect carried with it the corollary that, in the case of a winning bet where the Non-Neg staked on that bet would be retained by the player and could be used as a further free bet, the value of the retained Non-Neg, if treated as a “prize” for the purpose of s 11(10)(b), would likewise be zero. HMRC’s case, on the other hand, was that the Non-Negs were to be valued at their face value both for the purpose of s 11(10)(a) and s 11(10)(b), with the result that only when a Non-Neg was not retained by or returned to the player would any amount by reference to the face value of the Non-Neg effectively be incorporated into the banker’s profits. 44. It was thus not part of LCM’s claim, or its case in this appeal, that if, as we have decided, no value should be attributable to the Non-Negs for the purpose of s 11(10)(a), Non-Negs provided as prizes should nonetheless have value for s 11(10)(b) purposes. On the other hand, understandably, LCM did not dispute HMRC’s analysis of the position with regard to Non-Negs as prizes were HMRC’s argument on the value to be given to the Non-Negs for the purpose of s 11(10)(a) to have prevailed. 45. Given the respective positions of the parties on this question, it would not we think be satisfactory for us to leave matters there without at least expressing our own view. Although we recognise that this will not be binding, it is important, we consider, that the question of the valuation for gaming duty purposes of chips and vouchers for free bets should be regarded as a whole, thus taking into account both the positive and negative elements of the calculation of the banker’s profits.”
“48. Our view is that the Non-Negs fall within both (a) and (b) of s 20(4), and consequently must be regarded, for the purpose of s 11(10)(b) FA 1997 as having no value. The effect, which we regard as providing a coherent structure for the treatment of free bets, is that Non-Negs are taken into account on neither side of the calculation of banker’s profits.”
“Where a prize is a voucher which— (a) may be used in place of money as whole or partial payment for benefits of a specified kind obtained from a specified person, (b) specifies an amount as the sum or maximum sum in place of which the voucher may be used, and (c) [not relevant], the specified amount is the value of the voucher …” the specified amount is the value of the voucher …”
“Where a prize is a voucher … it shall be treated as having no value for the [relevant purpose] if— (a) it does not satisfy subsection (3)(a) and (b), or (b) its use as described in subsection (3)(a) is subject to a specified restriction, condition or limitation which may make the value of the voucher to the recipient significantly less than the amount mentioned in subsection (3)(b).”
“48. Our view is that the Non-Negs fall within both (a) and (b) of s 20(4), and consequently must be regarded, for the purpose of s 11(10)(b) FA 1997 as having no value. The effect, which we regard as providing a coherent structure for the treatment of free bets, is that Non-Negs are taken into account on neither side of the calculation of banker’s profits. 49. First, we consider that the Non-Negs fail to satisfy s 20(3)(a) and (b) BGDA. The Non-Negs, when returned or retained as “winnings” are capable of being used to play a game. But that does not constitute them being so used “in place of money as … payment for benefits”
“the effect of either of s 20(4)(a) of (b) is that a Non-Neg received or retained by a player as a prize has no value for the purpose of s 11(10)(b) FA 1997”