“authorise or require the taxable person to make the deduction on the basis of the use made of all or part of the goods and services” [Emphasis Added].
‘Subject to the following provisions of this section, “input tax”, in relation to a taxable person, means the following tax, that is to say— (a) VAT on the supply to him of any goods or services; […] being (in each case) goods or services used or to be used for the purpose of any business carried on or to be carried on by him…’
“Subject to the provisions of this section, he is entitled at the end of each prescribed accounting period to credit for so much of his input tax as is allowable under section 26, and then to deduct that amount from any output tax that is due from him.”
“It is not disputed that that the supplies of hospitality and of entertainment made by HCL are taxable supplies or that the supplies of gaming are exempt under Group 4 of Schedule 9 VATA (save that, for the period between starting trading and1 February 2013 the supply of facilities for playing some electronic games of chance was taxable (cf Note 1(d) to Group 4 of Schedule 9 as it stood prior to the amendments made by theFinance Act 2012 )).”
“(1) Subject to regulations 102, 103A, 105A and 106ZA, the amount of input tax which a taxable person shall be entitled to deduct provisionally shall be that amount which is attributable to taxable supplies in accordance with this regulation. (2) … in respect of each prescribed accounting period— (a) goods imported or acquired by and ... goods or services supplied to, the taxable person in the period shall be identified, (b) there shall be attributed to taxable supplies the whole of the input tax on such of those goods or services as are used or to be used by him exclusively in making taxable supplies, (c) no part of the input tax on such of those goods or services as are used or to be used by him exclusively in making exempt supplies, or in carrying on any activity other than the making of taxable supplies, shall be attributed to taxable supplies, (d) … subject to subparagraph (e) below, there shall be attributed to taxable supplies such proportion of the residual input tax as bears the same ratio to the total of such input tax as the value of taxable supplies made by him bears to the value of all supplies made by him in the period. (e) the attribution required by subparagraph (d) above may be made on the basis of the extent to which the goods or services are used or to be used by him in making taxable supplies, […] (4) The ratio calculated for the purpose of paragraph (2)(d), (e) or (g) above shall be expressed as a percentage and, if that percentage is not a whole number, it shall be rounded up … […] (10) In this regulation “residual input tax” means input tax incurred by a taxable person on goods and services which are used or to be used by him in making both taxable and exempt supplies.” (a) goods imported or acquired by and ... goods or services supplied to, the taxable person in the period shall be identified, (b) there shall be attributed to taxable supplies the whole of the input tax on such of those goods or services as are used or to be used by him exclusively in making taxable supplies, (c) no part of the input tax on such of those goods or services as are used or to be used by him exclusively in making exempt supplies, or in carrying on any activity other than the making of taxable supplies, shall be attributed to taxable supplies, (d) … subject to subparagraph (e) below, there shall be attributed to taxable supplies such proportion of the residual input tax as bears the same ratio to the total of such input tax as the value of taxable supplies made by him bears to the value of all supplies made by him in the period. (e) the attribution required by subparagraph (d) above may be made on the basis of the extent to which the goods or services are used or to be used by him in making taxable supplies, […] […] (10) In this regulation “residual input tax” means input tax incurred by a taxable person on goods and services which are used or to be used by him in making both taxable and exempt supplies.”
“(1) … this regulation applies where a taxable person has made an attribution under regulation 107(1)(a) or (d) according to the method specified in regulation 101 and that attribution differs substantiallyfrom one which represents the extent to which the goods or services are used by him or are to be used by him, or a successor of his, in making taxable supplies. (2) Where this regulation applies the taxable person shall— (a) calculate the difference, and (b) in addition to any amount required to be included under regulation 107(1)(g), account for the amount so calculated on the return for the first prescribed accounting period next following the longer period or the return for the last prescribed accounting period in the longer period if applicable, except where the Commissioners allow another return to be used for this purpose. (3) [This makes provision for situations where registrations are cancelled]. ”
“2. HCL contends that the actual economic use of its overhead expenditure in making taxable and exempt supplies, based on a floor space apportionment, differs substantially from the attribution prescribed by the standard method, under regulation 101 of theValue Added Tax Regulations 1995 , which is based on turnover. As such, it submits, it is required to carry out an “override calculation”, a standard method override (“SMO”), in accordance with regulation 107B (this, and all subsequent references to regulations, unless otherwise stated, refer to theValue Added Tax Regulations 1995 ). 3. However, HM Revenue and Customs (“HMRC”) contend that HCL’s proposed floor space SMO does not represent a more a (sic) fair and reasonable proxy for HCL’s economic use of its overhead expenditure than that calculated under the standard method. If HMRC are correct a further issue arises in relation to the correct treatment of business entertainment under the Capital Goods Scheme (‘CGS’).”
“… great gaming offer but also when you have a break we will have great amenities for you to have a meal at a restaurant or a drink at the bar on the terrace, to have a cigarette or a cigar on the terrace” (see [68]). There was a bar on the ground floor providing waitress service to the gaming tables (see [46]). HCL makes complimentary supplies of food and drink to some of its most valued customers,£1.2m out of£7.2m of hospitality (see [60]). The ground floor bar now only operates as serving the gaming customers (see [89]). The Tribunal recorded Mr Thomas’ evidence that he wanted each part of the Hippodrome to “… operate to the optimum it can. Both as a business in its own right and as an attraction to the business to [pull] in other people who may choose to spend on other … businesses within the Hippodrome” ((emphasis added) see [79]). These findings demonstrate that those attending a casino to game will often want to have food or drink, and the bars and restaurant are important amenities for gaming customers. b) The bars, restaurant and theatre gave HCL’s gaming business a competitive advantage. “Mr King explained that it was difficult to differentiate one gaming business from another saying that, “a wheel in one casino is a wheel in another casino.”
"Appellate courts should not rush to find such misdirection simply because they might have reached a different conclusion on the facts or expressed themselves differently."
“2. The appeal is therefore an appeal on a pure question of fact. The approach of an appeal court to that kind of appeal is a well-trodden path. It is unnecessary to refer in detail to the many cases that have discussed it; but the following principles are well-settled: i) An appeal court should not interfere with the trial judge's conclusions on primary facts unless it is satisfied that he was plainly wrong. ii) The adverb "plainly" does not refer to the degree of confidence felt by the appeal court that it would not have reached the same conclusion as the trial judge. It does not matter, with whatever degree of certainty, that the appeal court considers that it would have reached a different conclusion. What matters is whether the decision under appeal is one that no reasonable judge could have reached. iii) An appeal court is bound, unless there is compelling reason to the contrary, to assume that the trial judge has taken the whole of the evidence into his consideration. The mere fact that a judge does not mention a specific piece of evidence does not mean that he overlooked it. iv) The validity of the findings of fact made by a trial judge is not aptly tested by considering whether the judgment presents a balanced account of the evidence. The trial judge must of course consider all the material evidence (although it need not all be discussed in his judgment). The weight which he gives to it is however pre-eminently a matter for him. v) An appeal court can therefore set aside a judgment on the basis that the judge failed to give the evidence a balanced consideration only if the judge's conclusion was rationally insupportable. vi) Reasons for judgment will always be capable of having been better expressed. An appeal court should not subject a judgment to narrow textual analysis. Nor should it be picked over or construed as though it was a piece of legislation or a contract.” i) An appeal court should not interfere with the trial judge's conclusions on primary facts unless it is satisfied that he was plainly wrong. ii) The adverb "plainly" does not refer to the degree of confidence felt by the appeal court that it would not have reached the same conclusion as the trial judge. It does not matter, with whatever degree of certainty, that the appeal court considers that it would have reached a different conclusion. What matters is whether the decision under appeal is one that no reasonable judge could have reached. iii) An appeal court is bound, unless there is compelling reason to the contrary, to assume that the trial judge has taken the whole of the evidence into his consideration. The mere fact that a judge does not mention a specific piece of evidence does not mean that he overlooked it. iv) The validity of the findings of fact made by a trial judge is not aptly tested by considering whether the judgment presents a balanced account of the evidence. The trial judge must of course consider all the material evidence (although it need not all be discussed in his judgment). The weight which he gives to it is however pre-eminently a matter for him. v) An appeal court can therefore set aside a judgment on the basis that the judge failed to give the evidence a balanced consideration only if the judge's conclusion was rationally insupportable. vi) Reasons for judgment will always be capable of having been better expressed. An appeal court should not subject a judgment to narrow textual analysis. Nor should it be picked over or construed as though it was a piece of legislation or a contract.”
“…It was not incumbent on the Tribunal in making its multifactorial assessment not only to identify each and every aspect of similarity and dissimilarity (as this Tribunal so meticulously did) but to go on and spell out item by item how each was weighed as if it were using a real scientist's balance. In the end it was a matter of overall impression. All that is required is that “the judgment must enable the appellate court to understand why the judge reached his decision” ( per Lord Phillips MR in English v Emery[2002] EWCA Civ 605 ,[2002] 1 WLR 2409 at 19]) and that the decision “must contain … a summary of the Tribunal's basic factual conclusion and statement of the reasons which have led them to reach the conclusion which they do on those basic facts” ( per Thomas Bingham MR in Meek v Birmingham City Council[1987] IRLR 250 ). It is quite clear how this Tribunal reached its decision. In the words of Sir Thomas Bingham in Meek the parties have been told “why they have won or lost.””
“Not only are the Theatre, restaurant and bars identifiable features of the Hippodrome but each is operated from clearly recognisable and defined spaces – as indeed are the gaming areas. As Mr King said in evidence “if everything was just about the gaming” the Hippodrome “wouldn’t look anything like what it looks today. It would be a different animal” (see paragraph 64, above).”
‘108. For HMRC, Mr Donmall contends that not only did HCL make economic use of the areas in the Hippodrome allocated to hospitality and entertainment for those purposes but also used those areas for its gaming supplies, ie there was dual use of these areas. He says this was because gaming customers were attracted to the Hippodrome and encouraged to stay there because of the entertainment and particularly the hospitality and that this strengthened its gaming proposition over that provided by its competitors. This not only complied with the letter and spirit of the regulations requiring non-gaming areas to be available in a casino and for gamblers to take breaks, which Mr Thomas accepted (see paragraph 68, above), but also gave HCL the opportunity to cross-sell gaming to customers who initially came for other purposes. 109. Mr Donmall submits that such economic use is reflected by the fact that HCL, between 2012 and 2019, pursued both hospitality and entertainment despite these being unprofitable. He also refers to the customer poll and statutory declaration to the Gambling Commission which estimates that 30% to a third of HCL’s customers do not go the Hippodrome for gaming purposes (see paragraph 61, above) and asks how this equates with the almost 50% recovery rate of the overhead VAT produced by the SMO (see paragraph 99, above) advanced by HCL. 110. In addition Mr Donmall contends that it is clear from the contemporaneous documents that HCL’s principal activity is the operation of a casino which, he says, is supported by the reference to the Theatre and various bars in the Hippodrome in HCL’s accounts as “facilities” (see paragraph 66, above), the reference in its Business Plan as the “operation of a casino” as its “principal activity” and the “entertainment facilities” being “an important part of the overall offer of the casino” (see paragraph 62, above) and indeed by its very name, the Hippodrome Casino.’
'Where because no reasons are given it is impossible to tell whether the judge has gone wrong on the law or the facts, the losing party would be altogether deprived of his chance of an appeal unless the court entertains an appeal based on the lack of reasons itself.'
“125. For the reasons above, and having regard to all the circumstances, we have come to the conclusion that, given their extent and nature, the supplies of entertainment and hospitality from discrete and defined areas of the Hippodrome by HCL cannot be regarded as merely an adjunct to, or an amenity for, gaming. 126. We also consider that the general space, ie corridors, lavatories, staircases, lifts, walkways etc, is used to serve the building as a whole and that it therefore follows that it is appropriate to consider its use in the same way. We also take account of the fact, as is apparent from Mr King’s comparison of an electronic roulette terminal and table in the Heliot Steak House (see paragraph 103, above), that gaming generates higher turnover per square foot than hospitality. 127. As such, we find that the floor space method, as set out in HCL’s SMO calculation, does provide a more fair, reasonable and precise proxy of its economic use of its overhead expenditure than the turnover based standard method, particularly given that most of those overheads are property related. Accordingly HCL’s appeal succeeds on this issue.”
“49. As a general rule, under the second paragraph of Article 173(1) of the VAT Directive, the deductible proportion is to be determined, in accordance with Articles 174 and 175 of that directive, for all the transactions carried out by the taxable person by reference to turnover. 50. Nevertheless, under Article 173(2)(c) of that directive, Member States may authorise or require the taxable person to make the deduction on the basis of the use made of all or part of the goods and services. 51. According to the Court's case-law, Member States may, as a result of that provision, apply, for a given transaction, a method or allocation key other than the turnover-based method, on condition that the method used guarantees a more precise determination of the deductible proportion of the input VAT than that arising from the application of the turnover-based method (judgment of8 November 2012 , BLC Baumarkt , C-511/10, EU:C:2012:689, paragraph 24). 52. Thus, any Member State which decides to authorise or compel the taxable person to make the deduction on the basis of the use made of all or part of the goods and services must ensure that the method for calculating the right to deduct makes it possible to ascertain with the greatest possible precision the portion of VAT relating to transactions in respect of which VAT is deductible. The principle of neutrality, which forms an integral part of the common system of VAT, requires that the method by which the deduction is calculated objectively reflects the actual share of the expenditure resulting from the acquisition of mixed use goods and services that may be attributed to transactions in respect of which VAT is deductible (see, to that effect, judgment of10 July 2014 , Banco Mais , C-183/13, EU:C:2014:2056, paragraphs 30 and 31). 53. In that regard, the Court has nevertheless specified that the method chosen must not necessarily be the most precise possible, but that, as is apparent from paragraph 51 of this judgment, it must be able to guarantee a more precise result than the result which would arise from the application of the turnover-based allocation key (see, to that effect, judgment of9 June 2016 , Wolfgang und Dr. Wilfried Rey Grundstücksgemeinschaft , C-332/14, EU:C:2016:417, paragraph 33).”
“60. …Only two methods were before the FtT, TFL's and HMRC's. The FtT was not required to make its own enquiry as to whether there might be another method that was preferable. As Lord Carnwath said in the Supreme Court's decision in VWFS,[2017] UKSC 26 at [7], where the parties are substantial litigants represented by experienced counsel the tribunal "is entitled to assume that the parties will have identified with some care what they regard as relevant issues for decision." 61. HMRC's arguments also do not take sufficient account of the fact that the starting point is the standard method. As discussed further below in relation to Ground 7, that method is the appropriate method unless a special method applies or the proportion of recoverable input tax "differs substantially" from what would be recoverable under a use-based method, so that the SMO applies. The FtT rejected HMRC's approach for the reasons set out at paragraphs [231] to [235], including that TFL's residual input tax is incurred to collect the weekly payments that relate to the sale price of the goods as well as the finance element. This effectively left the default standard method contended for by TFL as the applicable one. In fact, the FtT also went on to consider whether TFL's approach was correct and concluded at [235] that it was, on the basis that TFL's business involves the making of taxable supplies of goods as well as exempt supplies, that the supplies are inextricably linked and, therefore, that TFL uses its overheads in the course of its entire business.”
“26. The decision of Customs refusing to approve a proposed partial exemption special method or to apply a standard method override can be appealed to a tribunal under section 83 VATA (see paragraph (e) of that section). The nature of such an appeal was considered by Etherton J in Banbury Visionplus Ltd v Revenue and Customs Commissioners[2006] STC 1568 . He concluded that an appeal was not “limited” in the sense identified by him ( ie an appeal where the tribunal is confined to considering whether Custom's decision was reasonable, in the sense that they did not take into account any irrelevant matters, they took into account all relevant matters and made no error of law and reached a decision which they could properly have reached); instead, the appeal was “full” in the sense that, “even if the disputed decision was a reasonable one, the tribunal should itself decide whether it secured a fair and reasonable attribution of input tax within the meaning of [ section 26 VATA ]”
“As to Mr Anderson’s submissions directed at the factual relationship between the insurance intermediary services and the taxable supplies made by DaP (and in particular his submissions regarding timing), it is important to bear in mind that (as the Advocate-General observed in Abbey National (see paragraph 29 above)) a ‘direct and immediate link’ may exist between the marketing and advertising costs and the insurance intermediary services despite the fact that there may be an even closer link between those costs and DaP’s taxable supplies. In other words, the quest is not for the closest link, but for a sufficient link.”
“33. The need for a process of attribution only arises where an item is a cost component (within Article 2 of the First Directive ) of two supplies, one taxable and one exempt: Dial-a-Phone Ltd v Customs and Excise Commissioners[2004] STC 987 (especially at [28] and [71]). If the standard (turnover) method does not result in a fair and reasonable attribution of the cost component, the search is for a more fair and reasonable method of attribution. The onus is on the taxpayer to show that the proposed PESM is more fair and reasonable, that is to say, more accurate:Case C-488/07 Royal Bank of Scotland Group plc v Revenue and Customs Commissioners [2009] STS 461 at [24]. 34. A fair and reasonable attribution to a taxable supply must, for the purposes of Article 17(2) and (5) of the Sixth Directive and regulation 101(2)(d) of the Regulations, reflect the use of a relevant asset in making that supply. In assessing that use, and its extent, consideration is not limited to physical use. The assessment must be of the real economic use of the asset, that is to say having regard to economic reality, in the light of the observable terms and features of the taxpayer’s business.”
“39. Warren J’s endorsement of a test of economic use anticipated the emphasis of the Court of Justice of the European Union (“the ECJ”) on “economic reality” in Joined Cases C-53/09 and C-55/09 Revenue and Customs Commissioners v Loyalty Management UK Ltd, Baxi Group Ltd v Revenue and Customs Commissioners[2010] STC 2651 , which concerned the VAT treatment of supplies under customer loyalty reward schemes. The ECJ said at [39]: “It must also be recalled that consideration of economic realities is a fundamental criterion for the application of the common system of VAT.” 40. The decision of the Tribunal in Aspinall’s Club Ltd (2002) (No. 17797) is another good illustration of the application of the relevant principles in the context of gaming and associated catering. The taxpayer (“Aspinall’s”) was the proprietor of a licensed gaming club, available for use by members and their guests. It was a particularly high-class casino, with all the ambience and appearance of an exclusive private club where members and their guests could enjoy luxurious facilities. Those facilities included dining room and bar areas in which there were VAT standard rated supplies, although 90 per cent of the food and drinks were not charged for. The areas devoted to gaming were small as compared to those used for dining and bars, but Aspinall’s derived its income overwhelmingly from its VAT exempt licensed gaming activities. The common areas contributed to the feeling of luxury and opulence. Some£6.5 million was spent on refurbishing the premises, including the creation of a new dining area, staff areas and office space, in respect of which VAT of nearly£1.2 million was incurred. Aspinall’s wished to have a PESM which would apportion residual input tax in the ratio of the floor area used to make taxable supplies to the sum of that area and the area used to make exempt supplies. The Commissioners refused, and Aspinall’s appealed. The Tribunal dismissed the appeal. The core of its reasoning was as follows: “48. What is very apparent to us is that the catering activities by themselves are not conducted with a view to profit. No board of directors could have permitted the catering business to continue for its own sake. It could only be justified in conjunction with other activities, i.e. gaming. Consequently we do not find it credible that the board could have regarded the refurbishment expenditure as a profitable project for the catering business, since clearly there would be a negative return on such an investment. Yet Aspinall’s would claim that, nevertheless, up to 55% or more of the VAT on that expenditure is recoverable. 49. …Most, if not all, the floor areas of the Club are of mixed use; they are used to make all the supplies of the business, both taxable supplies and exempt supplies. Furthermore, in running the business costs are primarily incurred to facilitate exempt gaming. This does not mean that exempt supplies are physically made from areas such as the bar and restaurant or, on the other hand, that taxable supplies are physically made from the gaming rooms. Nor, we would add, does it mean that there is for VAT purposes a single supply of gaming to which the catering is merely ancillary. But those factors do not rule out costs incurred in one area being incurred to make supplies in another area. This applies even more so in relation to costs incurred in respect of the common areas from which no supplies are directly made. Such costs are incurred and are truly ‘cost components’ of the exempt supplies which physically take place in the small gaming area. Those costs are funded by the gaming. That in itself does not make them cost components of those exempt supplies. But in this case it is additional proof, if any is needed, that gaming is the foundation of the business and it is the furtherance of that gaming which causes and is seen as justifying commercially the decisions to incur the expenditure. Here there is capital expenditure and ongoing expenditure incurred specifically to create and maintain the opulence and luxury, especially in the creation of spacious surroundings and general ambiance, which is seen as commercially necessary to promote the highly profitable gaming business. For these reasons, in our judgment, the Commissioners in considering the methods proposed have not confused use with purpose and have not acted unreasonably in deciding to reject them. Indeed for our part, if it is open to us to decide whether the floor area methods put forward by the Appellants are capable of achieving a fair and reasonable attribution of input tax, we have not been satisfied that they do.” 41. That case and the reasoning of the Tribunal, with which I agree, is illustrative of three points of principle. First, it shows the importance in these cases of close attention to the facts in order to understand the economic or commercial reality underlying the use of the relevant VAT inputs. Secondly, identification of the source or potential source of profit in a business may be an important feature of a business throwing light on whether or not the standard method or a PESM is a more fair, reasonable and accurate method of attribution. It all depends on the facts of each case: cf. Banbury Visionplus Ltd v Revenue and Customs Commissioners[2006] STC 1568 at [68]. Thirdly, depending again on the precise factual situation under consideration, the approach of the Tribunal in Aspinall’s Club at [49] may well be appropriate in a case where the taxable supplies are not, in themselves, a source of profit: “Those costs are funded by the gaming. That in itself does not make them cost components of those exempt supplies. But in this case it is additional proof, if any is needed, that gaming is the foundation of the business and it is the furtherance of that gaming which causes and is seen as justifying commercially the decisions to incur the expenditure.” 42. As both St Helen’s School and Aspinall’s Club show, and as was emphasised in Dial-a-Phone v Customs and Excise Commissioners[2004] STC 987 at [72] by Parker LJ (with whom the other members of the Court agreed), analysis of attribution for the purposes of Article 2 of the First Directive, Article 17 of the Sixth Directive and Regulation 101 is highly fact sensitive.”
“To create such an “experience” for its customers the Hippodrome includes over, its five floors, areas for live gaming, higher-stake and lower-stake gaming machines, electronic gaming, poker, eight bars, a restaurant – the Heliot Steak House, private dining/meeting rooms, conference and event areas, outdoor terraces, an entertainment and conference space (Lola’s), lounges, and a theatre which currently hosts Magic Mike Live. The premises are currently being extended to add a coffee shop and a Chinese restaurant, as well as a creperie on the outside of the Hippodrome building aimed at passers-by in Leicester Square.”
“60. HCL makes complimentary supplies of food and drink to some of its most valued customers. These are predominantly gaming customers but complimentary food and drink may also be given to others, eg restaurant customers on their birthday. In evidence Mr Thomas said, in relation to 2013-14, that: “We give away£1.2 million out of£7.2 million hospitality. So it’s circa 20% of the business, 16% or whatever.” “61. The importance of gaming to HCL is clear. Not only does it provide the greatest source of income but it is reflected in the name of the company and its premises, ie the “Hippodrome Casino”
“The principal activity of the business is the operation of a casino, providing a broad mix of casino games, both live table and electronic. The entertainment facilities will be an important part of the overall offer of the casino – the ethos is to provide a fun experience in a safe and welcoming environment.” 63. In a similar vein HCL’s accounts for the year ended31 December 2018 notes that “The gaming licence is fundamental to our primary business activity”
“We are a casino based entertainment complex that amazes, surprises and entertains London. Our venue is fun and accessible and we seek to create an extraordinary leisure experience that is both magical and memorable.”
“Our uniqueness is the experience we provide to customers. This is our primary competitive advantage and source of long term value. The Hippodrome experience is created by the effective deployment of the following assets.” 64. The assets to which it refers are the building (its location and “physical aspect”), staff and offer portfolio (“choice and quality and value”). Mr King explained that it was difficult to differentiate one gaming business from another saying that “a wheel in one casino is a wheel in another casino.”
“If one looks at the building, the building almost writes for itself. If everything was just about the gaming, that building [the Hippodrome] wouldn’t look anything like what it looks like today. It would be a different animal.” 65. The significance of gaming was also accepted by Mr Thomas who agreed in evidence that it was intended at the commencement of its business that gaming would be HCL’s principal activity. When referred to documents which stated that this remained the case at 2018, he said: “And it remains that now, you can see the figures, the greatest contribution to our overheads is from gaming.” 66. Contemporaneous documents repeatedly refer to the Theatre, Heliot Steak House and the various bars as “facilities” and “amenities”
“Consumers are increasingly seeking an experience, not simply direct product purchase and the multi-faceted Hippodrome operations - 3 live gaming areas, electronics, slots, high quality restaurant, bars and live theatre shows provide consumers with multiple reasons to visit. We continue to focus on improving facilities for customers and reinforcing our unique position in the marketplace … The casino market in the early part of 2019 remains challenging. The Hippodrome business is well placed to meet these challenges. We continue to invest in improving facilities for customers and believe that future prospects for the business are strong.” 67. This is also the case with promotional material on the HCL’s website: “Casino games are great! The experience gets even better when you have a full-fledged restaurant to satiate your taste buds. However if you smoke, there aren’t many facilities like The Hippodrome Casino that have a dedicated smoking terrace for your smoking breaks. The casino houses a two-level smoking terrace that’s equipped with a dedicated bar, and offers a wide range of cigars. You can smoke and drink while sharing your life experiences or just spontaneous laughter with like-minded people at our rooftop smoking terrace. When you’re at The Hippodrome Casino, you don't have to ever worry about getting bored, thanks to the wide assortment of games we have to offer. However when you feel like taking a break, visit the smoking terrace for a quick breather. You can do this without having to worry about getting chilly on winter evenings too, as you can enjoy summer vibes all year long with our heated roof terrace. This smoking oasis is indeed one-of-a-kind and is certain to be a welcome haven in the centre of London’s West End entertainment. So why not sip on your favourite drink and smoke at the rooftop smoking terrace, all the while soaking in the excitement and energy that The Hippodrome Casino exudes. And that’s not all; if you want to try out the house special drinks, make sure you ask for a specially designed cocktail from our exclusive list. Now you know why The Hippodrome Casino is one of the most popular, multi award winning casino in the country. Come visit now and let us lavish you with our specialities and hospitality. 68. Mr Thomas agreed that this confirmed that not only did the Hippodrome have a: “… great gaming offer but also when you have a break we will have great amenities for you to have a meal at a restaurant or a drink at the bar on the terrace, to have a cigarette or a cigar on the terrace.”
“… from a social responsibility point of view we will have an interaction with them and suggest they take a break. It may just be ten minutes away from the tables or having a coffee or whatever but it’s quite sensible.” “We give away£1.2 million out of£7.2 million hospitality. So it’s circa 20% of the business, 16% or whatever.” “The principal activity of the business is the operation of a casino, providing a broad mix of casino games, both live table and electronic. The entertainment facilities will be an important part of the overall offer of the casino – the ethos is to provide a fun experience in a safe and welcoming environment.” “We are a casino based entertainment complex that amazes, surprises and entertains London. Our venue is fun and accessible and we seek to create an extraordinary leisure experience that is both magical and memorable.” “Our uniqueness is the experience we provide to customers. This is our primary competitive advantage and source of long term value. The Hippodrome experience is created by the effective deployment of the following assets.” “If one looks at the building, the building almost writes for itself. If everything was just about the gaming, that building [the Hippodrome] wouldn’t look anything like what it looks like today. It would be a different animal.” “Consumers are increasingly seeking an experience, not simply direct product purchase and the multi-faceted Hippodrome operations - 3 live gaming areas, electronics, slots, high quality restaurant, bars and live theatre shows provide consumers with multiple reasons to visit. We continue to focus on improving facilities for customers and reinforcing our unique position in the marketplace … The casino market in the early part of 2019 remains challenging. The Hippodrome business is well placed to meet these challenges. We continue to invest in improving facilities for customers and believe that future prospects for the business are strong.” “Casino games are great! The experience gets even better when you have a full-fledged restaurant to satiate your taste buds. However if you smoke, there aren’t many facilities like The Hippodrome Casino that have a dedicated smoking terrace for your smoking breaks. The casino houses a two-level smoking terrace that’s equipped with a dedicated bar, and offers a wide range of cigars. You can smoke and drink while sharing your life experiences or just spontaneous laughter with like-minded people at our rooftop smoking terrace. When you’re at The Hippodrome Casino, you don't have to ever worry about getting bored, thanks to the wide assortment of games we have to offer. However when you feel like taking a break, visit the smoking terrace for a quick breather. You can do this without having to worry about getting chilly on winter evenings too, as you can enjoy summer vibes all year long with our heated roof terrace. This smoking oasis is indeed one-of-a-kind and is certain to be a welcome haven in the centre of London’s West End entertainment. So why not sip on your favourite drink and smoke at the rooftop smoking terrace, all the while soaking in the excitement and energy that The Hippodrome Casino exudes. And that’s not all; if you want to try out the house special drinks, make sure you ask for a specially designed cocktail from our exclusive list. Now you know why The Hippodrome Casino is one of the most popular, multi award winning casino in the country. Come visit now and let us lavish you with our specialities and hospitality. “… great gaming offer but also when you have a break we will have great amenities for you to have a meal at a restaurant or a drink at the bar on the terrace, to have a cigarette or a cigar on the terrace.”
“… from a social responsibility point of view we will have an interaction with them and suggest they take a break. It may just be ten minutes away from the tables or having a coffee or whatever but it’s quite sensible.”
“77. In evidence, Mr Thomas confirmed that one of the objectives of the Theatre was to put people into the casino to gamble. However, he explained that was is also an objective of the Theatre to pull people into the Hippodrome to eat or to drink as “part of the mix of products”… 78. Mr King explained that because of the close relationship with the Cosmopolitan in Las Vegas, whose marketing manager worked for HCL in London for a time, he was able confirm that the benchmark for a Los Vegas casino is for a crossover of 10% of their theatre tickets to gaming. He said that HCL “internally throughout the entire budget process” had considered that they could be “half as good as Vegas because they had been around a long time.”
“… operate to the optimum it can. Both as a business in its own right and as an attraction to the business to [pull] in other people who may choose to spend on other … businesses within the Hippodrome.” “… operate to the optimum it can. Both as a business in its own right and as an attraction to the business to [pull] in other people who may choose to spend on other … businesses within the Hippodrome.”
“83. While a proportion of these customers would have been at the Hippodrome for gaming purposes, Mr Thomas considered that, as food was also available 24 hours a day at the bars and served at the gaming tables, most of the restaurant customers were not there for that reason but accepted that there had been attempts to cross-sell the Heliot Steak House with the Hippodrome’s other products. 84. An example of this was a 2014 promotion by the Heliot Steak House to generate business from its gaming clients by giving customers a£5 gaming chip if they bought a steak. Although this was considered to be the fastest and most effective means of generating revenue it did not work. Mr Thomas explained that the customers who received the promotional£5 gaming chip went onto the gaming floor at busy times (both the restaurant and gaming floor are busy in the evenings) and disrupted experienced gamers as they did not know what they were doing. This, he said, demonstrated not only that customers who were not gamblers were already visiting the Hippodrome in order to use the Heliot Steak House in its own right but that also there was limited potential for cross-over between these business activities 85. Similar promotions which incorporated a gaming deal, eg a fixed priced meal and drink and a£50 win chip have resulted in the gaming chips often not being redeemed. A 2015 transaction report showed that 44% of such vouchers issued were returned unused. When asked if this meant that 56% of gaming vouchers were used Mr Thomas said: “That’s absolutely correct, but given it was effectively a free bet, it was quite surprising there was only 56%, we were giving people who were going to the restaurant a chip they could put down on roulette number and if it comes up they win£50 . You would think logically you’d just do it, but it obviously showed the lack of interest in [gaming by] those customers.” “That’s absolutely correct, but given it was effectively a free bet, it was quite surprising there was only 56%, we were giving people who were going to the restaurant a chip they could put down on roulette number and if it comes up they win£50 . You would think logically you’d just do it, but it obviously showed the lack of interest in [gaming by] those customers.”
“87. There are, in total, eight bars at the Hippodrome. However, as Mr King explained the these are not “generic” bars. Each, he said, has to be: “… very, very carefully thought through, not only price position point but actual product, what mix. Take Champagne for example, what brands of Champagne, because that speaks to the brand of the bar.” “… very, very carefully thought through, not only price position point but actual product, what mix. Take Champagne for example, what brands of Champagne, because that speaks to the brand of the bar.”
“By providing a rich and varied range of non-gaming entertainments, customers are provided with positive incentives to take breaks from play.”
“Tax charged on any goods or services supplied to a taxable person, […], is to be excluded from any credit under section 25 of the Act, where the goods or services in question are used or to be used by the taxable person for the purposes of business entertainment …”