Rank Group ruling could cost the taxman £500m

Rank Group plc, which runs casinos and Mecca bingo halls, has won a High Court case which could cost the taxman up to £500m.

In a significant judgment today, the High Court said Rank was entitled to £62m in VAT it had overpaid on games of interval bingo and certain gaming machines. 

The decision follows some UK gaming and bingo machines being exempt from VAT while similar machines were subject to the tax – a disparity illegal under EU law.

According to Deloitte an estimated £500m could be returned to the leisure industry, with pub chains, bookmakers and amusement arcade operators among those having made similar claims to get VAT repaid.

Barney Horn, indirect tax partner at Deloitte in Birmingham, said: “This is a landmark decision endorsing one of the most important principles of Community law, fiscal neutrality.  This underpins fair and effective tax policy.  It remains to be seen whether HMRC will appeal the decision, however, the decision of both the VAT Tribunal and the High Court are clear and unequivocal and we would expect the Court of Appeal to share this view. 

“The same principles should apply to any taxpayer which has paid VAT on the income from these activities. Other organisations in the leisure industry should consider their own grounds to submit claims for overpaid VAT and interest to HMRC following the guidance laid down by the High Court in this ruling.”

The interval bingo appeal concerned identical supplies of bingo games, one played under s.14 of the Gaming Act 1968 and one played under s.21 of the Gaming Act 1968, the former being subject to VAT, and the latter being exempt from VAT.  It was common ground that the games were identical and therefore HMRC failed to persuade the High Court that there was any objective basis for the differential in tax treatment.  This resulted in a breach of fiscal neutrality.

The gaming machines appeal, referred to as the “Slots appeal”, concerned supplies of certain gaming machines which were subject to VAT, and other similar gaming machines, which were comparable, which were treated as exempt from VAT. 

This also caused a breach of fiscal neutrality and distortion of competition.  HMRC amended the law in 2005, to tax all of these gaming machines.

Mr Horn said: “This decision upholds the principles set out by the European Court of Justice in the Linnewebber case.  This requires the same or similar services to be treated in the same way for the purposes of VAT. Both the VAT & Duties Tribunal and now the High Court have accepted this argument and upheld Rank’s claim for overpaid VAT.”

HMRC has until 29 June 2009 to appeal this decision to the Court of Appeal.

– Ends –

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