The
Committee consisted of the following
Members:
†
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.
Resolved,
That
the Committee has considered the VAT (Betting, Gaming and Lotteries)
Order
2006.
Committee
rose at twenty-one minutes to Five
o’clock.
