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Rank Group Set to Receive £83m Refund Due to VAT Breach
By Shane Addinall Nov 28, 2021 IndustryRank Group challenged Her Majesty’s Revenue & Customs on their application of VAT rates to B2 gambling machines before 2013. A court ruling and the treasurer’s decision to forgo their right to appeal leads to a multi-million windfall for Rank.An extended court battle has concluded between Britain’s Tax Authority and UK based casino operator, Rank Group. Her Majesty’s Revenue & Customs must repay a sum of £83 million to Rank.
The outcome follows the ruling from the European Union’s Court of Justice in 2011 that HMRC wrongfully applied VAT to Rank’s B2 machine revenues. HMRC announced in June that it will not appeal the ruling, which could cause more casino operators to seek refunds.
Rank’s claim received backing from the First-Tier Tax Tribunal on 30 June, which granted HMRC 60 days to agree with the operator on a final amount. Rank and Betfred were both plaintiffs in the original case.
Setting a Precedent
Rank Group is a London Stock Exchange-listed company and owns Grosvenor Casinos and Mecca Bingo Lounges. Betfred, established and owned by Fred Done, is a high-street bookmaker and together with Rank challenged HM Revenue and Customs regarding VAT.
Betfred claimed the tax authority should not have taken VAT on their Fixed Odd Betting Terminals (FOBT) for the period between 2005 to 2013. The bookmaker’s case hinged on the application of a 20% VAT rate to their FOBT, which was already subject to a 15% betting duty, breaching European tax law. HMRC changed VAT legislation in 2013, removing the VAT rate from FOBTs.
The court ruled in Betfred’s favour in 2018 as they found that the treasury had breached the principle of fiscal neutrality.
Betfred’s rebate came just in time to give their balance sheet a profit boost after covid closures nationwide. The bookmaker showed their £97.7 million VAT refund in their financial results for 2020 and stated that this case was now completed.
Rank focused on the period of 2002 – 2005 and accused the authority of inconsistent application of VAT exemptions concerning gambling machines. The operator’s B2 slot machines were subject to VAT charges which weren’t applied to any other gaming verticals and thus the court ruled in favour of the casino.
Seeing that HMRC will not appeal the findings, Rank can look forward to a £77 million refund plus interest of £5 million for the period. Industry experts believe these cases set a precedent and more operators will come knocking for rebates.
William Hill Turns Profit after Tax Refund
William Hill walked away victoriously in a similar ruling and received a lifeline of £230 million in 2020. The casino operator and bookmaker reported a 31.7% year-on-year decline in revenue for H1 in 2020, thanks to lockdown closures. HMRC refunded William Hill for incorrectly applying VAT on their FOBT prior to 2013. This fortunate turn of events allowed the operator to show a £115.6 million profit, despite massive turnover losses.
GVC announced it expects to receive a refund amounting to £200 million for the B2 machines in their Ladbrokes betting shops. Should more operators lodge claims against the treasurer, HMRC could be liable for refunds exceeding £1 billion in total.
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