UK gambling and betting firms are in line for massive tax refunds worth millions of pounds in the following months, a Swansea MP has warned, referring to the landmark legal victory of two bookmakers against HM Revenue & Customs (HMRC). Earlier this month, Betfred and Rank Group won a long-running battle against the tax authority over the VAT (value-added tax) they had paid on fixed-odds betting terminals (FOBTs) prior to 2013.
The two bookmakers are now set to receive compensation worth millions of pounds, which could have dire consequences for the UK Treasury, Swansea East MP Carolyn Harris has said. The tax tribunal ruling could see multi-million-pound tax rebates being poured into gambling and betting firms in the country. According to previous estimates, the industry could receive at least £1 billion in public funds if companies decide to follow suit and claim tax refunds from the HMRC.
On 17 April, the UK Tax and Chancery Upper Tribunal service led by Justice Anthony Mann and Judge Thomas Scott ruled in favour of Betfred and Rank Group in an appeal filed by the HMRC over a decision made by the first-tier tax tribunal in July 2018. The upper-tier tribunal accepted bookmakers’ arguments that collecting VAT on FOBTs before 2013 when the legislation was changed had breached the “EU test of fiscal neutrality”.
According to the latest decision, similar roulette-style games played in casinos and online were exempt from the tax. Therefore, the VAT charged on FOBTs was incorrectly levied. The HMRC had previously lost two challenges against the Rank Group and Betfred. Still, this might not be the end of the legal battle as the tax authority can appeal on the matter before the Court of Appeal.
Major Victory for the Gambling Industry
Swansea East MP Carolyn Harris has urged the Treasury to challenge the ruling. Harris, who has been a vocal campaigner for the reduction of FOBT stakes from £100 to £2 per round, has warned that the decision could allow multiple gambling firms to claim huge VAT compensations. She believes that problem gambling, which affects the most vulnerable people, is a public heal issue that must be taken as seriously as drug abuse by authorities.
If the HMRC decides not to appeal the decision or if it fails in its attempts to do so, this could lead to an avalanche of similar claims from other bookmakers. Accountancy firm RSM has estimated that the total figure of tax rebates could reach £1.5 billion plus interest. Moreover, the funds would be paid from the public purse, RSM says.
Following the ruling, a Rank Group spokesman announced that the compensation payment has already been made this month, without revealing the exact figures. In a separate statement, Betfred noted that this was a major victory for the industry but did not say whether it claimed a tax rebate from the HMRC. According to industry insiders, cited by The Guardian, the bookmaker is expected to reclaim around £100,000.