E01040

EXCISE DUTY – BETTING AND GAMING  -  licence  -  5-day gap between successive amusement machine licences  -  whether assessment to duty in respect of gap correct  -  yes  -  whether liability to duty avoided where gap through no fault of the licensee  -  no  -  appeal dismissed  

LONDON TRIBUNAL CENTRE

	AUSTIN LEISURE	           Appellants

-	and –

	THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS 	 Respondents

				Tribunal:	MICHAEL JOHNSON (Chairman)
						ANGELA WEST FCA

Sitting in public in Bristol on 6 march 2007

Mrs Ingrid Austin, partner in the Appellants for the Appellants 

Miss Judith Rogerson, counsel instructed by the Acting Solicitor for HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2007

DECISION

1.	This appeal concerns the application of the amusement machine licensing provisions of the Betting and Gaming Duties Act 1981 (“the 1981 Act”).  The issue is whether the Appellants are liable under the 1981 Act for duty in the amount of £85.  

2.	Amounts due in respect of licences for amusement machines are provided to be duties of excise by s 22(1) of the 1981 Act.  The rates of duty are those from time to time specified in s 23 of the 1981 Act.

3.	Mrs Ingrid Austin, who is one of the partners in the business of the Appellants, appeared for the Appellants and gave oral evidence to the tribunal.  She was the only witness from whom we heard.  She produced relevant documents to the tribunal.  We also had the benefit of a folder of relevant documents produced by Miss Judith Rogerson of counsel, representing H M Revenue and Customs (“Customs”).

4.	The facts are as follows.     

5.	The Appellants have for some years been in the business of placing and controlling amusement machines located in clubs and public houses.  These machines are licensed under the 1981 Act.  The licences are renewable on an annual basis.  The Appellants have to renew a large number of such licences during the course of a year. 

6.	The machine with which the tribunal is concerned (“the machine”) was a so-called “fruit” machine controlled by the Appellants and located in the “White Hart” public house, The Square, Whitchurch.  In September 2004, Customs sent to the Appellants a notice showing that duty of £715 was due in respect of the machine for a licence covering the machine for 12 months commencing on 16 October 2004.  That amount corresponded to the rate of duty provided under s 23 of the 1981 Act as it then stood.

7.	On 13 October 2004 Mrs Austin drew a cheque on behalf of the Appellants in favour of Customs.  The cheque was for an amount which included the £715 due as aforesaid.  We are satisfied that the renewal application and the cheque were posted by Mrs Austin, or alternatively her daughter, in good time to have reached Customs by 16 October 2004.

8.	In consequence Customs issued a licence in respect of the machine.  However the licence was expressed to relate to the period of 12 months commencing on 21 October 2004.  This meant that there was a five-day gap between the expiration of the previous licence on 15 October 2004 and the commencement of the new licence on 21 October 2004.

9.	This was an unintended gap so far as the Appellants were concerned.  The renewal invitation issued to the Appellants was for a licence that would succeed the previous licence without a break.  Application was made by the Appellants for the licence to be renewed without such a break.     

10.	The gap appears to have arisen because the application to renew was only processed by Customs on or about 20 October 2004.  Whether the application was received before then is not clear.  However we have no reason to doubt that the application was processed by Customs immediately it was received.  

11.	Given that the invitation to renew was expressed to be for a licence commencing on 16 October 2004, one might have thought that the licence would be issued to commence from then, even though not processed until a few days later.  However paragraph 7 of Schedule 4 of the 1981 Act provides that the period for which an amusement machine licence is granted shall begin with the day on which application for the licence is received by Customs.  We therefore find that it was not in law open to Customs to backdate the commencement of the licence applied for.

12.	The five-day gap was not noticed until the following year.  On 20 September 2005, the tenant of the “White Hart” public house telephoned the Appellants to say that Customs were querying the licence for the machine.  It appears that Customs had spotted the five-day gap.  The Appellants were unable to produce a licence covering the period of the gap, so on 25 October 2005 Customs granted a default licence under paragraph 3 of Schedule 4A of the 1981 Act and assessed the duty in respect of the period of the licence in the amount of £85.  That was the minimum amount of duty provided under s 23 of the 1981 Act, covering a licence lasting one month or less.

13.	In correspondence with Customs, Mrs Austin protested that the default licence was unfair.  She had expected the licensing of the machine to be continuous and no such liability to have arisen.  She pointed out – and we accept – that she had done everything reasonably within her power to ensure that the licence continued seamlessly.  She could not be responsible, she said, for what appeared to be the late arrival of the renewal application with Customs.

14.	Pursuant to s 14(1)(b) and (2) of the Finance Act 1994 (“the 1994 Act”), the Appellants requested a formal departmental review of the decision to issue the default licence and to assess.  The review was determined adversely to the Appellants by a decision contained in a letter dated 27 February 2006.  The Appellants then exercised their right to appeal to this tribunal pursuant to s 16 of the 1994 Act.  We are conscious that the powers of the tribunal include those referred to in s 16(5) as well as s 16(4) of the 1994 Act.

15.	For Customs, Miss Rogerson said that the Appellants might have been penalized pursuant to s 24(5) of the 1981 Act but they had not been.  Had there been a penalty imposed, it might be that Customs or this tribunal would have been satisfied pursuant to s 10(1) of the 1994 Act that a reasonable excuse existed for relieving the Appellants from the penalty.  However Customs had not thought that there had been such conduct as should give rise to a penalty in the first place.

16.	The fact remained, Miss Rogerson submitted, that the machine had stood in the “White Hart” and been operated over a five-day period for which it had had no licence.  The machine was therefore an unlicensed machine for the purposes of Schedule 4A of the 1981 Act.  A default notice was accordingly appropriate under paragraph 2 of that schedule, followed by the grant of a default licence under paragraph 3.  The assessment of an amount equivalent to the duty that would have been paid had the machine been licensed as it should have been was then in order under paragraph 4(2).      

17.	Mrs Austin replied that, of all the hundreds of licences that the Appellants had applied for, this was the only one that had ever been treated in this way.  She said that the Appellants had found it to be common for Customs to send out licences late, even though in every case, including this case, the Appellants had applied for renewals in good time.  She questioned why Customs could hold her to account for the alleged late arrival of the application in this case, when Customs were so slow in sending out licences applied for.  

18.	We have sympathy for the Appellants.  As mentioned above, we think that they did all they reasonably could to return the renewal application in good time.  Unfortunately, however, it is not the date of posting that counts but the date of receipt of the application.  That is because it is clear from paragraph 7 of Schedule 4 of the 1981 Act that the licence cannot be made to run from a date earlier than receipt by Customs.

19.	The effect of payment of £715 in respect of the machine in October 2004 was that the machine became licensed for a period of 12 months from the commencement of the licence issued.  A copy of the licence was in evidence before us and it is clear from what is expressed in it that the licence was provided to expire on 20 October 2005.  The licence could have lasted from 16 October 2004 to 15 October 2005, as expected, but instead the five days “lost” at the start were made up for by five additional days at the end of the period, ie 16 – 20 October 2005 inclusive.  Since then the licence has been further renewed with a 21 October start date, so that (as we understand matters) it is currently held for a period commencing on 21 October 2006 which is due to expire on 20 October 2007.

20.	In these circumstances, the public revenue has permanently gone without five days’ excise duty in respect of the machine unless the default licence and the assessment take effect.  Unless there is a correction of the position in 2004, the flaw in the licensing of the machine that arose at that time will be perpetuated.  As we see it, the contents of Schedule 4A of the 1981 Act are apt to redress situations such as that arising in this case.  Those provisions ensure that the duty is collected in respect of periods during which the machine has been operated unlicensed.

21.	It is true that the machine was only unlicensed for five days.  The duty assessed is for up to one month.  It is however the least amount of duty that would be payable for a licence for such a machine, in that the law does not contemplate the grant of licences lasting less than a month.  So as soon as it has been established that a period existed during which the machine was unlicensed when it should have been, a minimum of that amount of duty is chargeable, however short the period of omission.  This is provided by paragraph 4(7) of Schedule 4A of the 1981 Act. 

22.	It was entirely right not to issue a penalty in this case.  Had there been such a penalty, we would have exercised our powers to relieve the Appellants from it on the footing that the penalty was unreasonable.  However the duty itself is distinct: unless that is paid, a loss of revenue will have been suffered for which the 1981 Act provides and for which the Appellants are liable, however unfortunate the circumstances.

23.	For the above reasons, and whilst fully appreciating the Appellants’ reasons for concern, we indicated at the conclusion of the hearing that the appeal was dismissed.  This document formally records our reasons for the dismissal.

24.	No application for costs was made and none are awarded.

MICHAEL JOHNSON
CHAIRMAN

RELEASED:26  April  2007

LON/2006/8036