Retail bookmakers could be set for a £1.9bn VAT rebate

High-street bookmakers were handed their first piece of good news relating to the fixed-odds betting terminals (FOBT) saga last week as a first-tier tribunal (FTT) ruling worth almost £2bn was passed down. Bookmakers could be in line to receive a tax rebate worth £1.9bn.

Tax written on a notebook

Betfred is expected to receive £100m should HMRC not appeal against the ruling. © Pexels.

The case was initially brought forward by Betfred, who argued that its FOBTS shouldn’t have been subject to VAT between December 2005 and January 2013, since similar games, such as online slots, were not subject to the tax.

FOBTs were subject to the 20% VAT rate along with a 15% betting duty throughout the period. Betfred stated that this breached the EU principle of fiscal neutrality and last week the FTT agreed. VAT was removed from FOBTs in 2013 and replaced with a machine games duty that has risen from 20% to 25%.

That decision could be big for high-street bookmakers, since all VAT paid during that period – estimated to be around £1.9bn by consultancy firm GBGC – would be refunded. That figure is based on the total spent on the machines during the period, which is over £8bn plus interest.

The decision is the first major victory for bookmakers relating to FOBTs after the stakes were slashed from £100 to £2 earlier this year.

However, bookmakers are not letting themselves get carried away too easily.

HMRC has not publicly stated it will appeal, but an appeal is expected. At the very least, it is unlikely that bookmakers will see the funds for some time. A statement from HMRC said:

This is an important judgment and HMRC is giving it careful consideration. We have been very clear that fixed odds betting terminals stakes will be cut to make sure we have a safe and sustainable industry where vulnerable people and children are protected. But we must get this right, so we’re engaging with the industry to make sure it has appropriate time to implement the changes.Statement, HMRC

Critics of FOBTs have taken a more cynical view of Betfred’s intentions behind launching the appeal. Along with potentially receiving the tax rebate – estimated to be around £100m for Betfred alone – this case could help delay the implementation of the new maximum FOBT stake of £2, allowing operators to maximise revenues from FOBTS until a possible delayed implementation date of April 2018.

But government too would benefit from this delay. The stake cut will hit taxed revenue government receives from bookmakers hard and continuing to collect full duty from FOBTs for a longer period would cushion the blow of issuing the tax rebate to bookmakers.

The government has denied this would influence any delay, but that hasn’t stopped the opposition criticising government for putting problem gamblers at risk by delaying the implementation of lower stakes. Labour MP Carolyn Harris, who has been a staunch critic of FOBTs, has accused the government of being held to ransom by bookmakers.

Speaking about the ruling, Mark Stebbings, Betfred managing director, said:

We welcome the decision regarding the historical tax treatment of FOBTs, which pre-dates the introduction of machine games duty in February 2013. It does not concern Betfred’s ongoing tax liabilities.Mark Stebbings, Managing director at Betfred

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