Rank Group to receive £83m UK VAT slots refund

Rank Group has reached a final settlement of £83m with HRMC for historic VAT payment refunds.

Issuing an update on the London Stock Exchange, the land-based and online casino and bingo operator confirmed the initial refund of £77.5m, based on VAT paid incorrectly by Rank on slot machine income between April 2006 and January 2013.

In addition to the refund amount, the Maidenhead-based business will also receive £5.5m in interest accrued on the amount of the claim. However, both amounts will be subject to UK corporation tax at 19%.

“Rank intends to use the proceeds to strengthen its balance sheet and to fund continued investment in its transformation programme,” the operator said in an accompanying statement.

The agreement ends a long-running legal dispute between Rank and the UK government concerning the calculation of VAT on slots by HMRC.

HMRC initially charged VAT on fixed-odds betting terminals (FOBTs), asserting it had the right to do so under a 2005 law which excluded them from a prior EU VAT exemption on casino, online and electronic roulette machines.

Before December 2005, supplies of gambling by means of FOBTs were exempt from VAT, however UK legislation was changed with the effect that such supplies became standard rated for VAT purposes.

Using this justification, Rank was charged VAT on its gambling machines between 2002 and 2005.

Article 13B of EU directive 77/388 requires member states to exempt from VAT taxation “betting, lotteries and other forms of gambling, subject to conditions and 30 limitations laid down by each member state”.

Recent EU legal cases have established the precedent of so-called ‘fiscal neutrality’, which requires equal VAT treatment of similar supplies that are in competition within each member state.

Using this prior determination, Rank disputed HMRC’s VAT deduction, claiming an exemption could be claimed for FOBTs, filing a lawsuit against HMRC under pre-existing UK VAT law.

Fellow operator Betfred was also incorrectly charged VAT and launched its own lawsuit against the government.

Following two separate lower court hearings in which HMRC lost, the cases were combined in an Upper Tribunal Court hearing in April 2020, which HMRC lost for a third time.

HMRC would later decline to launch a final appeal within the 56 days required under UK law, paving the way for this settlement to be agreed.

Other operators successfully claiming back VAT include William Hill, which received £150m, and Entain, which benefitted to the tune of £200m.