The UK’s betting shops could be due a financial windfall and not because of England’s semi-final defeat to Croatia in the World Cup. 


The betting shops’ potential good fortune revolves around the treatment of VAT on B2 gaming machines (Fixed Odds Betting Terminals (FOBTs)) for the period between 2005 and 2013. 

One of the largest bookmakers has brought a case against HM Revenue and Customs (HMRC) claiming that VAT imposed on FOBTs in this period was contrary to European Law because it breached fiscal neutrality.  Citing a German VAT case, Linneweber 2005, the bookmakers have maintained that they were incorrectly paying VAT at the standard rate of VAT on their net winnings on the FOBTs and that the same games, or similar games, which were played either online or in casinos were exempt from VAT. On this basis, it has been argued that the FOBTs should have been exempt from VAT and therefore a reclaim is due for the period 2005 to 2013.

After years of haggling the case was heard in a VAT tribunal in November 2017. Deloitte has been leading the case and a decision is expected at any time.

When FOBTs first appeared they were subject to betting duty at 15%. Had HMRC left it at that there would not have been a dispute. Instead it imposed VAT on the machines in 2005. Then, realising that this potentially caused a conflict with European VAT rules, HMRC removed FOBTs from the scope of VAT in 2013 and introduced Machine Games Duty (MGD) at 20%, followed by a hike to 25%.  

GBGC believes that HM Revenue and Customs may lose the case and repay all the VAT collected plus interest.  The hike in MGD to 25% will no doubt cover the repayment due. Unless of course DDCMS decides to impose the £2 stake limit earlier than anticipated.  This seems unlikely when the sum to be repaid could be more than GB£ 1 billion.  

By Warwick Bartlett

Repayment Calculation 

Average weekly win per machine per shop = GB£ 800
VAT on this revenue @ 17.5% (rate increased to 20% in 2011) = GB£ 140
Weekly VAT on average 3.8 machines per shop = GB£ 532
Annual VAT on average 8,500 shops = GB£ 235.1 million
Estimated VAT over 8 years = GB£ 1.88 billion (less the amount of input VAT over the period, but add interest accrued).