FOBTs in the news with VAT victory and fresh calls for early £2 stake implementation

FOBTs in the news with VAT victory and fresh calls for early £2 stake implementation

Thursday, July 26, 2018 Posted by Joseph Streeter
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FOBTs have hit the news again this week with a significant legal development that could positively impact the UK’s bookies. A First-tier tribunal has found in their favour over a claim brought by a large bookmaker, effectively ruling that Category B2 games should have been VAT exempt from 2005 to 2013. Should the legal decision play out fully, the industry could be entitled to a payback of nearly £1.9bn.

The big question framing any future payout, however, is whether or not HM Revenue & Customs will appeal. On past experience there is a strong suggestion it will. In reality, the bookies have only just cleared the first fence that is the first-tier tribunal. HMRC, one suspects, can hardly let £1.88bn slip from its grasp without a challenge in the courts.

The roots of the current VAT dispute can be traced back several years to one Mrs Linnewebber who operated gaming machines in cafes and bars in Germany. Essentially her machines were being treated as liable for VAT, while the same machines in casinos were not, based on her games being ‘unlicensed’.

Having brought her case to the European Court of Justice, it noted in 2005 that under article 13(B)(f) of the Sixth Directive, member states were precluded from treating similar goods and services differently for VAT purposes. It was ruled that the German authorities should not have taxed the income on her games. Hence the concept of fiscal neutrality, which forms the basis of the current appeal over FOBTs.

It hasn’t been all good news on the FOBT front this week. Trade body Bacta has stepped up its efforts to see an early implementation of the £2 stake, arguing that players will rack up critically high losses playing the games over the summer months. Gamblers will lose an estimated £210m on high-stakes betting machines during MPs’ summer holidays said the association.

Chief executive John White noted: ““The delay between the announcement of the £2 stake and its implementation is clearly too long. There is no technical justification for this and it is putting vulnerable people at risk. The government has made the right decision, and we now urge it to speed up the process.”

Totally Gaming says: Bookmakers will have read of this week’s VAT developments with cautious optimism that while the machine genre is facing extinction, there will be some compensation to ease its passing. Caution is urged, however, as HMRC has a habit of taking such decisions with more than a degree of umbrage. While the prospect of a challenge isn’t set in stone, it shouldn’t be ruled out either. From Bacta’s perspective, it may well have to rule out any hope of an early £2 stake implementation. HMRC will need to find ways of filling that £1.88bn hole that’s about to be dug by bookmakers chasing VAT claims. A £2 stake introduced any sooner than 2020 won’t help its cause.

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