Disputed HM Revenue & Customs VAT charges could be returned to UK bookmakers

UK tribunal ruling favors Betfred and Rank over FOBT tax

Two years ago there had been estimates the retail bookmaking industry could receive as much as £1 billion if HMRC is ultimately unsuccessful in its appeal.
2020-04-21
Reading time 2 min
An upper tier tribunal accepted Betfred's arguments that collecting VAT on FOBTs between 2005 and 2013 had breached the "EU test of fiscal neutrality." HMRC had previously lost two separate challenges against the bookmakers, and now is able to appeal on the matter heard by the Court of Appeal.

The UK tax authority has lost its latest appeal in a long-running battle against Rank Group and Betfred that could see multi-million-pound compensations for previous tax charges made against gambling machines returned to UK bookmakers. HM Revenue & Customs (HMRC) had appealed to the upper tier tribunal against a decision made by the first-tier tax tribunal in July 2018, over the treatment of VAT (value-added tax) on then-controversial fixed-odds betting terminals (FOBTs).

Last Friday, the tax tribunal led by Justice Anthony Mann and Judge Thomas Scott accepted Betfred’s arguments that collecting VAT on FOBTs between 2005 and 2013 had breached the "EU test of fiscal neutrality" as similar roulette-style games played in casinos and online were exempt from the tax. However, that is not the end of the process as HMRC could appeal the decision again. 

Rank and Betfred had formerly contested HMRC VAT charges on FOBTs wagering by underlining that tax exemptions were in accordance with EU taxation policy on lottery and gambling products ‘subject to conditions and limitations laid down by each Member State,” SBC News reports.

Following EU precedent on ‘fiscal neutrality’, Rank Group targeted compensation on VAT gambling machine duties paid between 2002 and 2005, adding that exemption could be claimed against the provisions of HMRC’s ‘1994 Value Added Tax Act’. 

Similarly, Betfred had disputed HMRC VAT charges on FOBTS made between 2005 and 2013. The bookmaker stated that HMRC had made no distinction in the ‘supply of games’ available through FOBTs, and therefore it could claim exemption on certain casino games in line with industry’s taxation policy. Despite its original dispute with Rank Plc, HMRC did not update its UK gambling VAT legislation until January 2013 to cover FOBTs provisions.  

HMRC had previously lost two separate challenges against the bookmakers, who had won appeals sanctioned by the UK’s First-Tier Tribunal court. Settling HMRC’s challenge, the UK Upper Tribunal had chosen to treat its separate appeals as a single issue. 

Betfred issued the following statement on the Upper Tribunal’s decision: “This is a historical tax case where the Upper Tribunal has agreed with the original court decision in July 2018 that licensed betting offices were wrongly charged VAT on Fixed Odds Betting Terminals between 2005 and 2013 before the introduction of machine games duty. We will not be making any further comment as HMRC is still able to seek permission to have an appeal on the matter heard by the Court of Appeal.”

An HMRC spokesperson said: "HMRC is considering carefully the Upper Tribunal decisions before deciding on next steps."

Two years ago there had been estimates the retail bookmaking industry could receive as much as £1 billion if HMRC is ultimately unsuccessful in its appeal, although that may prove to be an overestimate given the current economic situation.

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