Mind game or mind sport?
Income Tax, Value Added Tax
My friend Tracey loves bridge. She wanted me to learn. Although I was brought up to think that card games were the work of the devil, what Tracey wants, Tracey gets, so over a frosty weekend in January this year I found myself at the Andrew Robson Bridge School. Towelling myself down after a brisk rubber with a retired police inspector, a garden designer and a twelve year old, I didn’t realise that I had been playing a sport. To me, it was whist behind enemy lines, not exercise.
A judicial review of Sport England’s decision not to classify duplicate bridge as a sport was heard on 22 and 23 September. The High Court won’t decide if bridge is a sport – only whether it was reasonable for Sport England to rule that it wasn’t. As Sport England distributes government and National Lottery funding, classifying bridge as a sport would make bridge clubs eligible for grants.
According to the BBC, the lawyer for the Department for Culture, Media and Sport told the Court:
“There is nothing objectionable about bridge, chess or similar mind games, but the sports councils are entitled to separate mind games from physical activities when deciding who to recognise.”
To aficionados (including, I assume, Tracey), contract bridge must be as competitive as football or cricket (or growing a prize vegetable). It may therefore come as a surprise to the estimated 300,000 regular bridge players in the UK that, in February 2014, a tax tribunal ruled that contract bridge was not a sport.
The English Bridge Union (EBU) had argued that its members should not have to pay VAT on competition entry fees because they were taking part in a sport. The exemption for supplies of services closely linked to sport or physical education is in article 132(1)(m) of Directive 2006/112 (the ‘VAT Directive’). The UK has transposed this as Items 1 to 3, Group 10, Schedule 9 VATA.
The EBU pointed out before the tribunal that croquet, darts, billiards and gliding were regarded as sports by HMRC even though, in those activities, ‘physical skill or activity plays second fiddle to mental skill’. By the way, HMRC also include octopush and korfball (whatever they are) in the list of sports or physical education activities qualifying for exemption.
In 1999 the International Olympic Committee said that bridge (and chess) were ‘mind sports’. The organisers of the 2020 Summer Olympics invited both activities to apply for inclusion in the Games, but they didn’t make the final short-list. (According to CNN, the ten weirdest Olympic sports which are no longer in the Games include club-swinging (dangerous), solo synchronised swimming (yes, really), live pigeon shooting (messy), tug-of-war (sweaty), and rope-climbing (tricky getting down once you’re up)).
The EBU’s treasurer told the tribunal that VAT was not charged on competition entry fees in France, Holland, Belgium, Ireland and Poland. Unimpressed by the vagaries of the VAT treatment in other Member States, the First-tier Tribunal patriotically accepted HMRC’s argument that it was the physical, rather than the mental, aspect of sports that resulted in VAT exemption, saying:
‘Contract bridge involves some physical activity, but not a significant amount, the physical activity is not the aim of participation and physical skill, as opposed to purely mental skill, is not particularly important to the outcome of participation.’’
The EBU has appealed and on 23 July the Upper Tribunal decided to ask the European Court for guidance on the essential characteristics of an activity in order for it to be a sport within the meaning of article 132(1)(m).
Sticking with cards, in April 2014 a professional poker player won his legal fight to not have to use his winnings to support his children because his income was not from ‘gainful employment.’ The Court of Appeal decided that Tony Hakki’s poker playing was not organised enough to amount to a trade, business or profession and therefore his winnings did not fall within the definition of earnings for the purposes of the Child Support legislation.
The former broker had played poker for many years and is, apparently, well known as ‘Tony the Hitman Hakki.’
Lord Justice Longmore said:
“On the facts found I do not consider that it can be said that Mr Hakki had a sufficient organisation in his poker playing to make it amount to a trade (or a business) let alone a profession or a vocation.”
The tax rules are the basis for the Child Support ones and poker winnings would not normally be taxable. The Court in Hakki devoted a considerable part of its judgment to the consideration of Graham v Green (1925) 9 TC 309, a decision of Rowlatt J on whether the winnings from betting on horse-racing were taxable. The question the Court had to answer was whether Mr Hakki had sufficient organisation in relation to his poker playing for that activity to constitute a trade in the sense used in a tax context.
Well, I think I’ve just had a brain fade and I’m exhausted from all that shuffling. I don’t think bridge is my sport.
May try blackjack.
*** UPDATE – October 2017***
On 15 October 2015 Dove J dismissed the EBU’s judicial review application. His reasons for doing so were as follows:
‘I am satisfied that the proper interpretation of the 1937 Act [the Physical Training and Recreation Act 1937] and the surrounding factual context of the 1996 Royal Charter are of far greater significance than any help which is to be derived from dictionary definitions of the individual words comprising the phrase in question. Read in context therefore, the word “sport” as it appears in the 1996 Royal Charter phrase “sport and physical recreation” connotes and requires an essential element of physical activity. In this connection the decision of the defendant to adopt the European Sport Charter definition of sport which requires an element of physical activity was entirely consistent with the proper understanding of their Royal Charter. Thus, whilst the word “sport” may have other definitions in other contexts, the correct interpretation of the operative phrase in the 1996 Royal Charter incorporates in this instance an essential element of physical activity.’
On 26 October 2017 the European Court gave its decision on the reference from the Upper Tribunal. While taking into account that duplicate bridge involved logic, memory and planning, and might constitute an activity beneficial to the mental and physical health of regular participants, the European Court found that the fact that an activity promotes physical and mental health is not, of itself, sufficient to support the conclusion that that activity is covered by the concept of ‘sport’ within the meaning of the VAT Directive. The fact that an activity promoting physical and mental well-being was practised competitively did not lead to a different conclusion. The Court’s conclusion was that an activity such as duplicate bridge, which is characterised by a seemingly negligible physical element, is not covered by the concept of ‘sport’ within the meaning of the VAT Directive.
The Court made the point that its interpretation was without prejudice to the question of whether an activity with a seemingly negligible physical element may be covered by the concept of ‘cultural services’ within the meaning of the VAT Directive, if the activity, in the light of the way in which it is practised, its history and the traditions to which it belongs, holds such a place in the social and cultural heritage of a country that it may be regarded as forming part of its culture.
Tax lawyer specialising in business tax, SDLT and VAT