Rank Group primed for £80m windfall in overpaid VAT case
First-Tier Tax Tribunal rules in favour of UK casino operator as HMRC is handed 56 days to appeal
Rank Group was handed a significant win yesterday after the UK’s First-Tier Tax Tribunal ruled in favour on its claim to be refunded VAT paid on slot machine income between 2006 and 2013.
Rank expects the refund to be materially in line with its previous estimates of circa £80m, which would significant strengthen the casino operator’s cash position at an important time.
HMRC now has 56 days to lodge an appeal against the First-Tier Tax Tribunal’s ruling, while both parties also have 56 days to agree the exact quantum of the claim.
Providing an update on liquidity after the reopening of its land-based casino and bingo venues in the UK and Spain, Rank said it comfortably met its £50m minimum liquidity test on 30 June.
In its Grosvenor Casino business, like-for-like net gaming revenue (LFL NGR) in venues outside of London is once again approaching 2019 levels after more than a year of Covid-19 disruption and closures.
In London however, LFL NGR is still down 38% due to the lack of international tourism, reduced numbers of office workers in the capital and ongoing late-night travel challenges for consumers.
In Spain, trading has improved across the group’s Enracha business as regional restrictions on capacity limits and opening hours have gradually been relaxed.
Despite this, Enracha NGR remains down 34% on 2019 levels.
Responding to the trading update, Peel Hunt analyst Ivor Jones said: “Rank has won its £80m VAT case; we now have to wait and see if it will be appealed by HMRC.
“The business traded as expected in the final quarter (to June) and managed cash effectively, with the result that it has a comfortable margin over its liquidity requirement.
“With Covid-19 restrictions easing, potential for positive regulatory change, and a possible material VAT refund, we reiterate our Buy recommendation and 240p target price,” he added.
Rank Group originally recorded a landmark victory in its VAT dispute in April 2020. Since then, operators including Betfred, Entain and William Hill have moved to claim back significant amounts.