UK bookmakers have had success in their case against HM Revenue and Customers (HMRC) over the VAT treatment of FOBTs, following a favourable ruling by the First-tier tribunal (FTT).


As GBGC reported in its recent gambling newsletter one of the UK’s largest bookmakers brought the case against HMRC claiming that VAT imposed on FOBTs was contrary to European Law because it breached fiscal neutrality. 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.

The decision issued by the FTT this week seems to have agreed with the bookmakers on the main points of their argument. 

The FTT assessed the nature of the similarity of FOBT games versus comparable games played via other means e.g. online or in a casino. It concluded that treating FOBTs differently for VAT purposes, for most games, “breached the principle of fiscal neutrality”.

Statements from the decision:

Roulette: “treating roulette played on FOBTs and roulette played online, in a casino live at the table or electronically by reference to a live table or an automated table differently for VAT purposes during the Claim Period breached the principle of fiscal neutrality.”
Slots: “our view is that the slots games all met the same need from the point of view of the customer and treating slots games played on FOBTs and slots games played online or on B3A machines differently for VAT purposes during the Claim Period breached the principle of fiscal neutrality.”
Virtual games: “our view is that treating virtual racing games on FOBTs, online and over the counter in LBOs differently for VAT purposes during the Claim Period breached the principle of fiscal neutrality.”
Card games: “our view is that treating virtual card games on FOBTs and online differently for VAT purposes during the Claim Period breached the principle of fiscal neutrality.”

In relation to “other games”, the FTT said “We are not able to reach any conclusion in relation to the other games as there was insufficient evidence.”

The FTT did not make a decision on the level of repayment due and HMRC has the right to apply for an appeal. 

This is clearly an important decision for not just the bookmaker who brought the case but also for all bookmakers who paid VAT on FOBTs during the seven-year period in question. Industry-wide, the repayment claim will be significant. GBGC estimates that total FOBT gross win for the period under assessment was around GB£ 8.5 billion.

GBGC’s view

The UK Treasury can ill afford to lose this money at the current stage in the electoral cycle. The FTT’s decision came on the same day as the government announced public sector pay increases of up to 3.5% for some professions. The price for a general election in 2019 is 15/8 (2022+, 7/4) with Ladbrokes, and governments usually like to splash the cash on the electorate in the run up to asking for their votes.

If the HMRC is forced to repay the money in the near future, in the absence of lengthy appeals, then Treasury will certainly look for ways to claw the money back. No-one beats government for very long.

The claw back can be through delaying the FOBT stake reduction for as long as possible to earn more Machine Games Duty or by simply increasing betting and gaming duties, which has already been muted for Remote Gaming Duty, but could easily be extended sector-wide.

For now though, after a turbulent period for the betting sector, it should take some heart from a ruling that has gone in its favour.