There was some positivity for British bookmakers this week as the news broke that BetFred has been successful in challenging HM Revenue & Customs before a tax tribunal on the imposition of VAT on Fixed Odds Betting Terminals between 2005 and 2013.
In its challenge, Betfred claimed that the decision to apply the 20 percent VAT rate to FOBTs from 2005 in addition to an existing 15 percent betting duty, was a breach of European tax law.
Government stopped levying the VAT in 2013, replacing it with machine games duty that started at 20 percent and has since risen to 25 percent.
The tax tribunal ruled that collecting VAT on FOBTs had “breached the principle of fiscal neutrality” because similar roulette-style games played in casinos and online were exempt from the tax.
The decision could result in a massive GBP 1 billion refund to bookies if government fails to appeal or is unsuccessful in an appeal. The HMRC has declined to indicate what it intends to do, but says it is considering what is clearly a very important judgement.
BetFred’s managing director, Mark Stebbings, 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.”
Our readers will recall that after years of bitter argument anti-FOBT campaigners earlier this year persuaded government to reduce the maximum stake on FOBTs from GBP 100 to just GBP 2 with effect from 2020.
The drastic reduction sparked industry warnings that bookmakers would be hard hit, shops could close and jobs may be lost.
Government also stands to lose significant tax revenue from the cuts, although it has indicated that it is considering replacing the lost revenue by hiking tax on online gambling to 20 percent.