New Judgment: Commissioners for Her Majesty’s Revenue and Customs v The Rank Group PLC  UKSC 48
08 Wednesday Jul 2015
On appeal from:  EWCA Civ 1289
The Supreme Court unanimously dismissed the appeal concerning whether the takings from slot machines operated by the appellants were subject to VAT. If the takings resulted from the provision of a “gaming machine”, as defined, then they were subject to VAT. The disputed element of the definition of “gaming machine” was: “the element of chance in the game is provided by means of the machine.”
The VAT and Duties tribunal concluded, in favour of the appellant, that the disputed machines were not “gaming machines” because the Random Number Generator (RNG) was not part of any terminal and the element of chance was not provided by the machine containing the slot. The High Court agreed. The Court of Appeal overturned this decision; Rimer LJ considered that each terminal and the single RNG could together constitute a machine. That decision is now being appealed to the Supreme Court.
Giving the leading judgment Lord Carnwath stated that the question was how the element of chance was provided “in the game”. The overall purpose of the machine was the creation of a game of chance for the player, in which purpose both the terminal and the RNG play, and are designed to play, essential and connected functions. Carnwath reasoned that the tribunal’s approach limited attention to the physical identity of the equipment as viewed by the player, but ignored the necessary components of the task which the equipment is performing. The terminal is useless for playing the game without the RNG.
Lord Carnwath explained that the element of chance in any game is provided “by means of” the player’s action in pressing the button, so interrupting that ever-changing sequence at a particular moment. The terminal is not simply communicating information from the RNG, but is the active means by which the winning or losing combination is generated. The RNG is a necessary part of the process, but its response is entirely automatic. He therefore concluded that, in these circumstances, it is a fair use of language, and consistent with the apparent policy of the legislation, to describe the element of chance as provided “by means of” the terminal.
To watch hearing, please visit: Supreme Court website