Why is the Jumpman case important? What sort of promotions are involved?
The Jumpman case is important as it considers the remote gaming duty (“RGD”) treatment of a particular type of promotion; namely, a game that is always free to play, from which free spins and other prizes (e.g. cash) can be won. This can be contrasted to promotions involving a paid game, played for free, i.e. a game for which a player typically has to pay to play, where a player is given an opportunity to play the game for free (this involves a “waiver” of the obligation to pay the usual stake).
The legislation is clear that free spins won from a paid game, played for free are, when used, exempt from RGD (on account of them falling within relieving provisions aimed at “re-wagering” requirements). In such a situation, an RGD liability will have arisen on the first game in the chain; this is because, where the obligation to pay a stake is “waived”, RGD is payable on the amount that a player would otherwise have had to pay. The logic behind the relieving provisions, is that where a player wins a paid game, played for free (this being the first game in the chain, which will be subject to RGD), where the player subsequently has to re-wager his notional winnings a number of times (before being able to withdraw real cash winnings), the intervening plays should not be subject to RGD (otherwise the operator would be assessed to RGD on multiple occasions without actually receiving any stake money from the player).
As regards always free to play games, HMRC’s position has been that free spins won from such a game, when used to play a subsequent game, do not benefit from the relieving provisions. HMRC’s position has been that the subsequent use of those free spins should be subject to duty.
How did this affect Jumpman’s game?
Jumpman offered a promotional game called Mega Reel. This was a “wheel of fortune” style game from which free spins (to play other games) were a potential prize on offer.
Jumpman claimed that there was an obligation to make a payment to play Mega Reel and that obligation was waived. As such, Jumpman contended that Megal Reel was a paid game, played for free. However, the FTT had previously found, on the facts, that there were no incidences of Mega Reel where the players in question (i.e. those offered the promotion) had to pay to play the game. As such, the reality was that Mega Reel was an always free to play game. Jumpman appealed on this point (this was “ground #1 of the appeal”) and the Upper Tribunal dismissed it.
Ground #2 of the appeal was the extent to which the 2016 consultation documents (this being the consultation that preceded the introduction of the rules charging freeplays to RGD) could be considered in interpreting the words of the legislation. Both Jumpman and HMRC agreed that the FTT had been wrong to rule that these documents could not be considered. As such, Jumpman’s appeal on ground #2 succeeded.
Ground #3 was the crucial one. It reduces to this:
Where a free spin is won from an always free to play game, is the subsequent use of that free spin subject to RGD or exempt?
The case turned on the meaning of the words “the gaming” in the key legislative section that exempts from RGD the subsequent use of free spins won from certain preceding games. The tribunal judges analysed the different interpretive arguments (which they conceded pointed in both directions) but came down in favour of Jumpman’s interpretation; namely, that a free spin won from any remote gaming (including an always free to play game) should, when used, be exempted from RGD. HMRC had argued that the relieving provisions should only apply where the preceding game was a game played pursuant to an offer to waive the obligation to pay a stake.
Could it affect other operators that had contingent liabilities, provisions, assessments, overpayment claims refused or ongoing HMRC compliance checks based on the interpretation HMRC advanced in Jumpman?
This judgement will be of significant interest to operators who offer promotional games which are (or should be treated as) always free to play games.
HMRC has recently been assessing operators to RGD in respect of games which are always free to play. Such assessments have treated the subsequent use of the free spins won as subject to RGD. If the Upper Tribunal’s decision is not successfully appealed by HMRC, operators should be seeking to obtain repayment of RGD where relevant and/or have such assessments withdrawn. Ensuring that all appropriate procedural steps are taken to protect operators’ positions, including appealing decisions within time, is critical.
Is there any realistic prospect of operators revisiting historic RGD returns or seeking repayments where comparable promotional structures were taxed?
Operators that have accounted for RGD on free spins won from always free to play games should consider applying to HMRC for a refund of RGD. Operators typically have 4 years in which to do so.
What are the chances of HMRC successfully appealing this decision?
This is difficult to predict. However, the fact that the judges admitted that the interpretive arguments did (to some degree) point both ways and as that there will be a wider industry impact if the taxpayer is successful might suggest HMRC will want to seek permission to appeal. As such, this may not be the end of the story.
