In a cautionary tale of unforeseen consequences, a bingo hall operator which made changes to the way its business was run in order to cut costs, reduce staffing levels and minimise queues on the door has ended up with a £540,000 tax bill for its trouble.
The company, which runs a number of members-only bingo venues, including the UK’s largest, had abolished door admission charges with a view to cutting overheads whilst improving customer convenience. Admission charges were instead purportedly added to the cost of the first book of bingo tickets bought by each client.
The company argued that the admission charges should be discounted when calculating its liability for 20 per cent duty on its profits under Section 19 of the Betting and Gaming Duties Act 1981. However, HM Revenue and Customs disagreed and hit the company with a retrospective £541,413 tax demand.
In rejecting the company’s appeal, the First-tier Tribunal noted that its arguments ignored the fact that members of the public were not charged on the door for entering the club. Admission charges were not, in reality, added to the cost of tickets but were properly attributable to the playing of bingo.
Noting that not all those who entered the venue were there to play ‘main session’ bingo – instead preferring gaming machines and other attractions – the Tribunal found that admission for all members was in fact free. The purported inclusion of an admission charge in the cost of tickets was merely an ‘internal allocation’ and did not reflect the reality of the situation. On that basis, the company’s liability for bingo duty had rightly been calculated without any deduction in respect of admission charges.