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Standing Committee Debates

VAT (Betting, Gaming and Lotteries) Order 2006

The Committee consisted of the following Members:

Chairman: Derek Conway
Burden, Richard (Birmingham, Northfield) (Lab)
Cable, Dr. Vincent (Twickenham) (LD)
Crabb, Mr. Stephen (Preseli Pembrokeshire) (Con)
Davidson, Mr. Ian (Glasgow, South-West) (Lab/Co-op)
Dunne, Mr. Philip (Ludlow) (Con)
Goldsworthy, Julia (Falmouth and Camborne) (LD)
Goodman, Mr. Paul (Wycombe) (Con)
Healey, John (Financial Secretary to the Treasury)
Johnson, Ms Diana R. (Kingston upon Hull, North) (Lab)
Jones, Mr. David (Clwyd, West) (Con)
Keeble, Ms Sally (Northampton, North) (Lab)
Kemp, Mr. Fraser (Houghton and Washington, East) (Lab)
Selous, Andrew (South-West Bedfordshire) (Con)
Smith, Mr. Andrew (Oxford, East) (Lab)
Stoate, Dr. Howard (Dartford) (Lab)
Watts, Mr. Dave (Lord Commissioner of Her Majesty's Treasury)
Winnick, Mr. David (Walsall, North) (Lab)
Libby Preston, Committee Clerk
† attended the Committee

Second Standing Committee on Delegated Legislation

Monday 30 October 2006

[Mr. Derek Conway in the Chair]

VAT (Betting, Gaming and Lotteries) Order 2006

4.30 pm
The Financial Secretary to the Treasury (John Healey): I beg to move,
That the Committee has considered the Value Added Tax (Betting, Gaming and Lotteries) Order 2006 (S.I. 2006, No. 2685).
Mr. Conway, I welcome you to the Chair. It is the first time that I have served under your chairmanship in Committee, and I look forward to it this afternoon. I welcome my hon. Friends and all hon. Members to the Committee.
The order amends the existing VAT legislation to ensure that the definition of a game of chance is updated to align with the definition in the Gambling Act 2005. In the 2004 Budget, the Government announced that we would review gambling taxation in light of the Gambling Act. Having updated the definition of gaming machines in the 2005 pre-Budget report and the provisions relating to the valuation of gaming machines in the 2006 Budget, we now need to change the definition of a game of chance in both section 23 and schedule 9 to the Value Added Tax Act 1994 to ensure that it reflects the definition in the Gambling Act. In the 2006 Budget, we announced that we would do so later this year. At that time, we needed more time to satisfy ourselves that no VAT difficulties would be caused by slight differences in wording between the Gaming Act 1968 and the new Gambling Act.
We have now been able to give the matter the consideration it needs. We have introduced two orders: one to amend section 23 and the other to amend group 4 of schedule 9. The section 23 order is subject to the negative procedure and deals with the value of gaming machine takings on which VAT is accounted for. The latter, which is before the Committee this afternoon, is subject to the affirmative procedure.
The group 4 order, if I might call it that—the documentation refers to it as such—does four things. First, it simplifies matters by removing the separate definition of a gaming machine from group 4 and replacing it with a cross-reference to the identical definition in section 23 of the VAT Act. Secondly, it provides a new definition of a game of chance in group 4, replacing the cross-reference to the old Gaming Act 1968 definition. We concluded that if the definition of a game of chance were amended by the Department responsible for the social regulation of gambling, which might do so using secondary legislation, we would not want that change automatically to affect the definition for VAT purposes. We would want to be able to consider the implications for the taxation regime of any social regulatory changes.
Thirdly, the order ensures that the definition of a game of chance is the same across the United Kingdom, including in Northern Ireland. Fourthly, it restores the application of VAT to pinball machines. I must level with the Committee: the takings from pinball machines were inadvertently brought within the scope of the exemption created by the 2005 pre-Budget report order when the Gambling Act’s concept of gaming was imported into VAT legislation dealing with gaming machines. No one in the industry seemed to notice the error, but we are regularising the situation by returning it to what it was and was intended to be before the PBR 2005. Pinball machines paid VAT previously, as the old definition of a gaming machine was not restricted to machines that gave prizes.
The order ensures that for the first time, any game of chance not played for a prize—not just pinball machines—will not be exempt. We believe that the change is correct in principle and proofs the order against any potential new developments in the field that are difficult to anticipate now. The compliance costs of the order are minimal. On that basis, I commend the order to the Committee.
4.35 pm
Mr. Paul Goodman (Wycombe) (Con): It is a pleasure to see you in the Chair, Mr. Conway, and I am sorry that I cannot honour your presence properly by having a voice in full working order. None the less, I shall do my best for your elucidation and that of the Committee and Hansard.
It is a pleasure to see that the Treasury is leading on its own business—it was not doing that in the Chamber earlier, on the Stern review. I shall not be sidetracked into discussing that, however, Mr. Conway, as you would quite properly rule me out of order.
If I heard the Minister correctly, at least part of the order before us is based on pinball machines having previously been exempted. The Treasury did not notice, the Opposition parties did not notice, and neither did the industry, and the fault is being corrected. I have a few brief questions. I should like to know about the difficulties with VAT to which the Minister alluded, which prevented the introduction of the order before now. I should also like to know whether there will be an impact on revenue, together with the Treasury’s assessment of how many transactions will be caught by the change, and the effect that the order will have on the industry, if any.
4.36 pm
Julia Goldsworthy (Falmouth and Camborne) (LD): It is a pleasure to serve under your Chairmanship, Mr. Conway. Although I am in full voice, I do not think I have much to say on this particular order, so I shall not detain the Committee. The order is not controversial, it just rationalises the language and definitions that are set out in the Gambling Act 2005 to ensure a single definition throughout the UK, including Northern Ireland. However, though the explanatory notes say that there is no material difference between the new and the old, I should like the Minister explain the extent of the difference. I know that it was discussed during passage of the Gambling Act, but it may be worth reprising. All the other changes appear to be redrafting exercises, and I am pleased that the loophole with regards to gaming machines, which nobody seemed to notice at the time of drafting, has now been closed. Ultimately the changes will make the legislation easier to understand, and will make the read-across easier, so on that basis my party does not oppose the order.
4.37 pm
John Healey: I welcome the two succinct contributions from the spokespersons for the Opposition parties. As the hon. Member for Falmouth and Camborne (Julia Goldsworthy) said, the reframing effected by the order together with the other order that is subject to the negative resolution procedure will make read-across easier, and will make the Bill easier to understand. I am glad that she welcomed the closing of the inadvertent loophole on pinball machines. To answer the hon. Member for Wycombe (Mr. Goodman), the Government’s best estimate of the revenue at stake is £175,000 during the period between the pre-Budget report and the start of November this year. That will be the cost of exempting pinball machines in the way that the existing situation does, which obviously was not intended. The difficulties that he asked me about were those that I referred to when he and I discussed the provisions of clause 16 in the Finance Bill in Committee. The first was whether the precise VAT definition should follow the Gambling Act definition, and we had further work to do with industry, and internally, to satisfy ourselves that that was correct. The second, as the hon. Gentleman may remember, arose from the fact that the Gambling Act does not apply to Northern Ireland, whereas tax legislation clearly does. We needed to make sure, in consultation with interested parties in Northern Ireland, that the approach that we are taking this afternoon would not cause difficulties there. We are indeed satisfied of that, and we have framed it in the order. I hope that the Committee will assent to the regulation.
Question put and agreed to.
That the Committee has considered the VAT (Betting, Gaming and Lotteries) Order 2006.
Committee rose at twenty-one minutes to Five o’clock.

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