Rank hits jackpot in European VAT ruling

THE GAMING industry received a boost as the Rank Group won its long-running dispute over the VAT treatment of gambling receipts.

The European Court of Justice found that HM Revenue & Customs breached the rule of fiscal neutrality by treating similar gaming machines in different ways for VAT purposes. Claims covering the period 2003 to 2005 have been paid, but this judgement will pave the way for hundreds of businesses to receive refunds from as far back as the 1970s.

Richard Wild, PKF’s director of VAT, said: “Although the case turned on some highly technical arguments, the basic position is that the taxman cannot treat two similar machines in a different way for VAT purposes, as this breaches the basic rule of fiscal neutrality, even if machines fall under different licensing categories, as they can in the UK.”

Anbreen Khan, VAT partner at Deloitte, who advised Rank, commented: “This is a fair decision, which corrects the unlawful application of VAT across the industry. We have always considered that there was a fiscal imbalance in the VAT treatment of certain gaming machines and forms of bingo. We are pleased that the ECJ has endorsed the previous rulings of the UK Courts that VAT was wrongly levied and should be repaid.”

HMRC argued that it acted with due diligence to ensure compliance with fiscal neutrality, but the ECJ said there was no defence of due diligence available under European law.

An HMRC spokesman said: ‘HMRC is studying the judgment and will issue further advice once the potential implications have been identified.

‘The ECJ decision simply answers the questions raised of it by the Court of Appeal and the Upper Tribunal and the case will need to return to the domestic courts for them to consider the position in light of the ECJ judgment.

‘The judgment clarifies how the principle of fiscal neutrality should be interpreted and sets out the test to be applied in determining the similarity or otherwise of gaming machines.’

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