| Industry still
reeling from governments cut in maximum FOBT stake from £100 to
Bookmakers are in line for a
£1bn tax rebate after a court ruled they were wrongly charged VAT on
revenue from controversial fixed-odds betting terminals (FOBTs).
finding, in a case brought against HM Revenue & Customs by the high-street
bookmaker Betfred, will be seen as a major victory for an industry reeling from
the governments decision earlier this year to slash the maximum bet on
FOBTs from £100 to £2.
A tax tribunal ruled that collecting
VAT on FOBTs between 2005 and 2013 had breached the principle of fiscal
neutrality because similar roulette-style games played in casinos and
online were exempt from the tax.
A spokesperson for HMRC declined to
say whether it would appeal against the verdict, but said: This is an
important judgment and HMRC is giving it careful consideration.
If HMRC does not seek to overturn the ruling, or is unsuccessful in its
appeal, the rebate for the whole of the bookmaking sector is expected to be at
least £1bn. Industry sources said Betfred alone was likely to reclaim
The industry-wide figure is based on the rate of VAT paid
on combined income from FOBTs between 2005 and 2013, which amounts to more than
£8bn plus interest.
Campaigners speculated that concern within
the Treasury that Betfred, which is owned by the billionaire Conservative party
donor Fred Done, would win the case might have been behind its much-criticised
decision to delay implementation of the FOBT stake reduction until April 2020.
The Treasury already plans to offset the loss of duty from the machines by
increasing the tax on online gaming.
However, the postponement would
allow it to cushion the impact of the expected £1bn tax rebate by
extending the period during which it continued to collect duty from FOBTs.
Bookmakers also stand to benefit from the delay, on top of any tax
rebate they receive, because they derive more than half of their revenue from
FOBTs, about £1.8bn a year.
The Labour MP Carolyn Harris said:
I am incensed by this news and frustrated that due to recess we
cant bring the chancellor to the house to answer questions. If this
government is guilty of playing Russian roulette with the lives of problem
gamblers by holding off introducing the cut in FOBT stakes, as a sweetener to
protect the Treasury from the wrath of the bookies, it will be beyond belief.
If the bookies have this kind of power over the chancellor then this government
is in more trouble than any of us can imagine.
the spokesman for Fairer Gambling, which campaigns for tougher industry
regulation, said: Instead of giving the bookies a double win, Treasury
should instead put the tax for remote [online] gambling up to at least 25% in
the budget this year and enact a £2 stake on FOBTs by April 2019.
The Treasury said that any suggestion it delayed the cut in stakes
because it expected a £1bn hit from the tax ruling was completely
A spokesperson said: 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 were engaging with the industry to make sure it
has appropriate time to implement the changes.
case hinged on its claim that the decision to apply the 20% VAT rate to FOBTs
from 2005, on top of a 15% betting duty to which they were already subject, was
a breach of European tax law. HMRC removed VAT from the machines in 2013,
replacing it with machine games duty that started at 20% and has since risen to
Betfreds 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 Betfreds ongoing tax liabilities.