18912
VAT – ZERO-RATING  -  supplies of question cards in sets designed for passing the driving test  -  whether attracting zero-rating as books  -  held not to be books  -  appeal dismissed  

MANCHESTER TRIBUNAL CENTRE

 
 	
	 GLOBAL GAMES INTERNATIONAL LTD 	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	Michael Johnson  (Chairman)		
Gilian Pratt

Sitting in public in York on 22 November 2004

Mr S Phillips, director of the Appellant, for the Appellant

Miss H Redmond, counsel instructed by the Solicitor for the Customs and Excise, for the Respondents

	© CROWN COPYRIGHT 2005 

DECISION
1.	Section 30 and group 3 of Schedule 8 of the Value Added Tax Act 1994 (“the Act”) provide that supplies of goods specified under the heading “Books, etc”, are to be zero-rated for the purposes of value added tax.  These items are described as including “books, booklets, brochures, pamphlets and leaflets” and “covers, cases and other articles” supplied with such items and not separately accounted for.  

2.	The issue that the tribunal has to decide in this appeal (“the issue”) is whether the Appellant’s product “Full Licence Pass the test Theory Test Card Game” (which we will call in this decision “the product”) is of such a description as mentioned in group 3, or the supplies made by the Appellant of that product are of such a description – see section 30(2) of the Act.  If so, the supplies of the product are zero-rated; if not, they are subject to value added tax at the standard rate. 

3.	The issue arises because, in a decision contained in a letter to the Appellant dated 5 May 2004, the Commissioners of Customs and Excise (“Customs”) have ruled that the product does not fall within group 3 of Schedule 8 of the Act.  That letter maintains that the correct VAT treatment for supplies of the product is for tax to be charged on such supplies at the standard rate.  The Appellant disputes this, and appeals on the following ground contained in the Notice of Appeal, viz

“That our product should be zero-rated for VAT purposes as it has the same information and content as the books which are zero-rated (see the attached sheet with more information)”.   

4.	The appeal was presented on behalf of the Appellant by its director, Mr Steve Phillips.  He described the product to the tribunal and produced samples of the product.  By reference to a written case supported by a bundle of documents, Mr Phillips gave evidence as to the genesis, manufacture, marketing, sales and usage of the product.  

5.	Mr Phillips also called as a witness to give oral evidence on the Appellant’s behalf Mr Andrew Morris, of the Yorkshire and Humberside Chamber of Commerce.  Mr Morris was not cross-examined.         

6.	Customs were represented by Miss Helen Redmond of counsel, who handed in a bundle of relevant documents prepared by Customs.  Miss Redmond called as her sole witness to give oral evidence Mr Neil Robert Crowther, a Senior Officer of Customs working in the National Advice Service of Customs in the Regent Centre, Gosforth, under whose signature the decision letter dated 5 May 2004 had been issued.  Mr Crowther gave evidence in the form of a Witness Statement dated 24 August 2004, was cross-examined by Mr Phillips and re-examined by Miss Redmond.   
7.	Miss Redmond had a further witness whom she was prepared to call if required, namely Ms June Valerie Stephen, another officer of Customs working in Gosforth, who had produced a Witness Statement dated 8 September 2004.  In the event it did not appear that Ms Stephen had anything useful to add to Mr Crowther’s evidence, accordingly she was not required for cross-examination by Mr Phillips, nor did the tribunal need to hear from her in oral evidence.

8.	We find the following facts.

9.	The product consists of a set of 54 stiff question cards contained in a cardboard box measuring approximately 14.2 cm x 8.5 cm x 1.9cm.  The box can be opened at each of its narrow ends.  The cards, which are only just smaller than the box, have information on each side.  One side of each card shows different pictures of road signs or other illustrations, similar to those contained in the Highway Code.  These pictures are lettered “a”, “b” and “c”, or “a” and “b”.  The reverse of each card contains a series of five questions and answers – different in the case of each card.  The fifth question and its answers relate to the pictures on the obverse of the card; the other four questions are unrelated to the pictures.  There is also a top card and a “rules card”, making 56 cards in all. 

10.	The obverse of each question card is in a mottled dark green colour, with a white border, on which are superimposed the road signs or other illustrations, in full colour as appropriate to the particular signs or illustrations.  The reverse of each question card is white, with a red border, with the questions printed in black and the answers in red.  “FULL LICENCE Pass the test” appears at the bottom of the reverse of each card in black, white and red.

11.	The top card is evidently not for use – the obverse states “FULL LICENCE Pass the test” in red, yellow and white on the mottled dark green background, beneath which there is a representation of a globe in blue, green and two shades of brown, surrounded by “GLOBAL GAMES INTERNATIONAL LTD” in red.   The reverse of that card states “FULL LICENCE Pass the test” in black, white and red on the white background common to the reverse of all the cards, beneath which, in black and white, there is stated “A MEMBER OF A©ID ANTI COPYING  IN DESIGN”.  The borders of this first card are similar to the rest of the cards.

12.	There is also a final “Rules Card”.  The obverse of this is white, without a border, and sets out, in a series of unnumbered paragraphs, what are stated to be the rules of a game involving the cards.  We have set out these “rules” in an Appendix to this decision.  At the foot of this card “FULL LICENCE Pass the test” is printed in black, white and red.

13.	The reverse of this card is in white with a red border.  This contains, in black, copyright information, the name and address of the manufacturer, and a disclaimer, and continues:

“Information in this pack is for guidance only.  Please note – some answers might differ for Ireland.  Remember, for the latest legal requirements always refer to the latest edition of the Highway Code”.

14.	The reverse of this card then invites questions or comments by e-mail, and requests readers to give the gift of life and carry the organ donor card.  Beneath this, in black on a yellow rectangle, is printed:  “A MEMBER OF A©ID ANTI COPYING IN DESIGN”, above “FULL LICENCE Pass the test” in black, white and red.  

15.	The box is predominantly in a shade of green on all faces, lighter than the green used for the obverse of the cards.  On the front of the box “FULL LICENCE Pass the test” is superimposed in red, white and yellow, above which is a roundel in blue and white stating “THE EASY WAY TO PASS YOUR THEORY TEST”.  Across the middle of the front of the box is a skewed yellow band on which is printed in red “THEORY TEST CARD GAME”.  Beneath that is a small full colour picture of the box, beneath which, in a circle, the cards themselves are depicted in full colour, some showing their obverse and some the reverse.  “Splashed” onto the front of the box, just beneath the yellow band, is a small 14-point star in white, bearing the words “IDEAL FOR SELF STUDY” in black.

16.	The back of the box also bears a yellow band stating “THEORY TEST CARD GAME”, but this time not skewed.  Beneath that are small pictures of the box and the cards, in full colour, similar to the front of the box.   Above the yellow band are printed the following testimonials, in white and yellow:

“Great way to remember”	News of the World
“Well produced, excellent idea”	Driving Instructor Association
“Exciting way to pass the theory test”	Motor Schools Assoc.
“Best idea we’ve come across”	Auto Express

17.	Beneath the small pictures of the box and the cards on the back of the box the following material is printed, in white:

“FULL LICENCE, PASS THE TEST ® is the exciting way to learn quickly and easily how to pass your DRIVING THEORY TEST.  Also ideal for refreshing your memory.”

“FULL LICENCE, PASS THE TEST ® the hand held question and answer card game for two or more players or an interesting option for self study.”

“Inside this box is a set of rules, 54 colourful cards packed full of road signs and information designed to help you pass your DRIVING THEORY TEST”.

18.	Beneath this appears the recommended retail price of £6.99, copyright information, the names of the proprietors, name and address of the Appellant, and a small “splashed” 20-point star in yellow with “LATEST EDITION” superimposed in red.

19.	The sides of the box bear the description, “FULL LICENCE Pass the test” and there is a smaller version of the globe surrounded by the name of the Appellant, as found on the obverse of the top card.  On the top of the box “FULL LICENCE Pass the test” is stated.  This is also on the bottom of the box, adjacent to the “bar code”, European identification lettering and the recommended retail price. 

20.	“FULL LICENCE Pass the test” is stated on the top card to be a Trade Mark © 1999.  As shown on the cards and on the front, sides, top and bottom of the box it constitutes a logo in which the letter “L” in “LICENCE” is a depiction of an “L-plate” similar to that tied onto vehicles driven by learner drivers, complete with string for attaching the plate, but with a tear part way down its middle.  The innuendo is clear – it is that a learner driver will be ripping up his or her “L-plates” having passed the driving test.

21.	The product possesses its own International Standard Book Number.  When the issue of its correct treatment for value added tax arose, the Appellant modified the packaging of the product.  In the modified package, the cards when extracted from their box are found to be attached to one another by a piece of transparent paper stuck to the obverse of the top card, the reverse of the final “rules card” and the left hand edge of all the cards in between, so as to form a spine, thus enabling the cards to be opened book-wise.  In this version, the top card bears on its obverse, in between the “FULL LICENCE Pass the test” logo and the representation of the globe surrounded by the name of the manufacturer, the following words, in white:

“International Standard Book Number ISBN 0954305701 Peel back the binding for the theory card game”.

On the reverse of this top card, the ISBN has been added beneath the “FULL LICENCE Pass the test” logo.
 
22.	We find that this modified version of the product was produced so as to overcome the objection that the set of cards included in the product was not bound together in any way.  We find that the transparent paper attaching the cards together is robust and that, notwithstanding its thinness, it does effectually bind together the left hand edges of the question cards in the set so that they are secure in book form with the top card and the “rules card”.  However we cannot see how the product can be used as specified in the rules (see the Appendix to this decision) without first removing all the cards from the spine, which we think that the additional wording on the obverse of the top card is expressly envisaging.

23.	The evidence given by Mr Phillips clearly demonstrates that books can take many forms.  The product is ordered by, supplied to and retailed by bookshops.  Its ISBN number facilitates its ordering and marketing as if it were a book.  If this were not the intention, an ISBN number would not have been given to it.  As a learning aid, the product would be of debatable value were it not complete, or almost complete, but with a set of 54 question cards, it is valuable for study.  We accept that the product is used by colleges for teaching the Highway Code as well as for private purposes.  The product has enthusiastic supporters.

24.	The product describes itself as a “game”.  However, unlike most games, playing this game is not an end in itself.  The object is not so much to “win” the game as to acquire knowledge to pass the driving test.  The information contained in the product is broadly equivalent to what might be contained in a permanently bound book, devised for that purpose.

25.	Nevertheless, if one uses the product as expressly intended by the manufacturer – that is to say, in accordance with the rules contained in the Appendix to this decision – one is indeed playing a game.  The game is a means to an end, but its characteristic is that the end – knowledge of the Highway Code – is pleasurably achieved by playing the game.  That knowledge is acquired enjoyably and hopefully more easily than if one studied the same material privately.  

26.	For Customs, Miss Redmond submitted that we should have regard both to the physical characteristics of and the function of the product in deciding the issue.  She described to us different kinds of publication regarded as “books”.  Thus, she said, there can be books in booklet form.  Moreover one can collect recipe cards in ring binders, which make up a cookbook when complete.  Customs conceded, Miss Redmond said, that this sort of publication should not be not excluded from zero-rating in accordance with group 3 of Schedule 8 .

27.	On the other hand, Miss Redmond submitted, a publication may be intended for use as a game.  In that case, the game may be bound together in some way, and still remain a game.  Miss Redmond suggested that the test was: would the binding defeat the purpose of the product?  In that case, the binding might give the product the appearance of a book, yet it would not be a book.  In the end, the product was not to be used as a book.

28.	The ISBN classification was, Miss Redmond said, explicable in terms of the educational and instructive value of the product, which nobody disputes.  It was right that the product should be marketed and retailed along with books.  However that did not make the product itself into a book.

29.	Miss Redmond cited Customs and Excise Commissioners v Colour Offset Ltd [1995] Simon’s Tax Cases 85 and the decision of Mr Demack, chairing a tribunal in Birmingham, in Flipcards Ltd v Commissioners of Customs and Excise (1996) VAT Decision 13916, in which he held that a set of question and answer cards relating to the Highway Code, designed for passing one’s driving test, was not what one generally regards as a book or leaflet.  In this, Mr Demack followed and applied the definition of “book” given by Mr Justice May in the Colour Offset case at [1995] STC 89-90 .  Miss Redmond invited us to follow those cases and to dismiss this appeal.   

30.	For the Appellant, Mr Phillips submitted that, in particular in its modified version, the product was no different from a loose-leaf book.  That was how it was classed by the whole of the book industry.  Books could be printed on card, which was the position in the case of the product.  The product had been allocated an ISBN and was sold to and retailed by booksellers.  That would not have happened had the product been regarded as a game.  The Appellant had overcome the difficulty of the product not having been bound by producing the modified version of the product.  Games were not prevented from being books, as was illustrated by the zero-rated book entitled “Who wants to be a millionaire?”

31.	In the Flipcards Ltd case, Mr Phillips said, the point had not been made that the question and answer cards constituted a loose-leaf book.  The test was not whether the world at large would regard the product as a book, but whether or not it was in fact a book.  All the authorities that the Appellant had consulted regarded the product as a book.  The product was a card game, but more importantly, it was a book – playing the game was just an option.

32.	Customs were wrong, Mr Phillips submitted, to suggest that the tax treatment of an item largely depended upon the layout and format of the item.  All the evidence presented by the Appellant tended to the conclusion, Mr Phillips said, that the product constituted a book.   He invited us to allow the appeal.

33.	We took time to consider our decision in this case, having regard to its importance to the Appellant, and the effort that has gone into presenting and arguing the appeal.  

34.	We agree with Mr Phillips that to regard the product simply as a game would not be to do it justice.  The product is a highly innovative and attractive tool for learning.  Properly used, we can see that many will find in the product the ideal way to equip themselves to overcome the considerable hurdle of passing the theory section of the driving test.

35.	Moreover it is right to regard not just the physical characteristics and the function of the item as being of importance but also the content of the item.  We are prepared to accept Mr Phillips’ submission that the printing of the product on cards and its manner of presentation would not undermine its classification as a book, at least in its modified version, if that were otherwise its nature.  Indeed, we note that in the Colour Offset case, it was the lack of content of the blank diaries and address-books in issue that denied their nature as “books”.  We think that Customs are right to treat the supply of a ring binder and the progressive supply of recipe cards to make up a cookbook as amounting to supplies within group 3, because of the nature of the items supplied.

36.	On the other hand, it is not the answer to the issue to say that the product is obviously a book having regard to how it has been treated.  The Appellant is persuasive in alleging that booksellers, authorities and others have treated the product as a book.  But the evidence that those bodies have treated the product as if it were a book is not, in our view, probative that it is a book.  As the learned Judge said in the Colour Offset case, the right question is not, “Is this a book?”, but “What is the ordinary meaning of the word ‘book’?”  In our opinion, in order to determine whether or not the product is within group 3 of Schedule 8 of the Act, one must look beyond its treatment and scrutinize the product to see whether it falls within the ordinary meaning of the word.

37.	Regarded in this way, the product is not a book.  The product consists of a set of cards which are independent of one another.  In our judgment, the product is not presented as a complete course, which if followed equips one to pass the driving test.  We can see that, in such a case, the product, at least in its modified version, might be regarded as a book.  The nature of a book, be it a work of fact or fiction, is that it has a beginning and an end and, in between the beginning and the end, one is taken on a journey between various points, absorbing information in so doing. A course or instruction manual might be such a book, even in the form of a collection of loose leaves or cards.    However, as we see it, the tribunal has before it in the product neither a course nor an instruction manual, but rather a tool for passing the driving test.  That tool is in reality an aid for absorbing the contents of the separate booklet known as the Highway Code, rather than a book in its own right.     

38.	That aid takes the form of a card game.  True, the game need not be played with the product.  One could simply study the contents of the cards, or ask another person to ask one the questions.  But the aid is presented as a “Theory Test Card Game”.  We think that that is the special feature of the product – the inspired idea, as it were – that probably attracts buyers and has led to praise being heaped on the product.  

39.	Whether the product is played as a game, or the cards are simply read, the user is not absorbing the contents of a book.  In the case of the modified version of the product, if the bound cards are read, without separating them to play the game, one is still not reading a book – rather one is reading a series of cards that happen to be bound together.  One looks in vain for any indication that the cards are to be approached systematically, or in any particular order.

40.	We are accordingly left in no doubt that the issue in this appeal should be decided in favour of Customs.  We decide that neither the original version nor the modified version of the product amounts to a book, loose-leaf or otherwise.    We therefore dismiss this appeal.

41.	The tribunal is grateful to the representatives of the parties for the courteous and helpful way in which they conducted this appeal.  The appeal may be restored to the list by either party if desired, purely for argument as to costs.  However as this is one of those difficult cases of classification where it has not hitherto been clear what the outcome should be, and seeing that we have accepted and rejected contentions of both parties, it may help for us to indicate that our provisional view is that there should be no order as to costs in this instance.

MICHAEL S JOHNSON
CHAIRMAN
RELEASE DATE: 21 January 2005

MAN/2004/0283

APPENDIX

RULES CARD

This is a game for two players and consists of fifty four cards with questions numbered one to five on each card.

Questions are in black and answers are directly beneath in red.  Any part of an answer that appears in brackets provides additional information only and is NOT required to win the card.

Cards should be dealt out equally and held with the road sign pictures facing the opposing player.

The game starts at the toss of a coin with the winner picking a number between one and five and asking that question from their first card.  The number should ALWAYS be chosen BEFORE the player looks at the card.

Regardless of whether their opponent gives a correct or incorrect answer, the card is placed in the MIDDLE.  If an incorrect answer is given, the questioner should read out the correct answer BEFORE placing the card in the middle.

The second player should then ask a question from their first card.  The number of the question must be the SAME as that asked by their opponent.  Example – If player one asked question 4 then player two must also ask question 4.

In order to win the cards in the middle, a player must give a correct answer when their opponent has given an incorrect answer.

The winner of the cards ALWAYS picks the number of the next question.  When no one wins the cards in the middle, the LAST person to win continues to choose the number of the questions.

You will win the game when your opponent has no cards left in their hand to play with.