Dransfield Novelty Company Limited & Others v Commissioners for Her Majesty's Revenue and Customs

Facts

Dransfield Novelty Company Limited supplied electronic lottery terminals to small non-profit members' clubs, societies and miners' welfare institutes. Each machine held virtual stacks of lottery tickets pre-ordered at random; when a player inserted a coin the machine simply released the next ticket in the stack, while a display of spinning fruit wheels, which had no bearing whatever on the outcome, provided the excitement. The machines were labelled "This is a Lottery Machine", and after a new regulatory sub-category of machine was created in 2007 they were modified to a maximum stake of £1 and a maximum prize of £500. Dransfield installed the machines free of charge and shared with the clubs the margin between stakes taken and prizes paid. HMRC took the view that the machines were "amusement machines" under the Betting Gaming and Duties Act 1981, so that Amusement Machine Licence Duty of £1,965 per machine was due, with joint and several liability on Dransfield and the clubs. Dransfield appealed, seeking repayment of £2,324,725 said to have been overpaid, and several clubs brought parallel appeals heard at the same time, with further club appeals stood behind them. Related VAT assessments had already been dropped following Oasis Technologies (UK) Limited v The Commissioners for Her Majesty's Revenue and Customs.