Save content
Have you found this content useful? Use the button above to save it to your profile.
AIA

Gaming giant wins £30m fiscal neutrality case

by
11th Nov 2011
Save content
Have you found this content useful? Use the button above to save it to your profile.

The European Court of Justice (ECJ) has ruled in favour of leading gaming business Rank Group which was looking to reclaim £30m overpaid in VAT.

The court confirmed that taxing similar games differently through UK VAT law was in breach of fiscal neutrality. The EU law of fiscal neutrality requires that supplies of services that are the same or similar should be not be treated differently for VAT purposes.

It also ruled that it is not necessary to establish competition between the two games or take any account of the fact that the two games are regulated under different betting and gaming legislation when considering tax treatment.

Previously in the UK, two separate games of Mechanised Cash Bingo (MCB) could be treated differently for UK VAT purposes depending on the size of the stake or the prize money on offer - one would be subject to VAT and the other would be exempt from VAT.

Lorraine Parkin, head of indirect tax at Grant Thornton, said: "It does not make sense to tax identical or very similar supplies differently. This case is the latest in a long line of judgments on the issue of fiscal neutrality and provides much needed clarity and a welcome victory for Rank".

Rank also took a separate case in relation to the different treatment of slot machines and fixed odds betting terminals (FBTOs).

HMRC had incorrectly exempted FBTOs from VAT and Rank had claimed that under the principle of fiscal neutrality, it was entitled to treat similar slot machines as exempt during the period in question.

However, the ECJ ruled that Rank could not seek re-imbursement of the VAT paid on taxed slot machines as the state's failure to correctly tax FBTOs could not be used to imply that ordinary slot machines should not be taxed.

Parkin added: "This is a sensible judgement on these further points, Rank are likely to be disappointed. It would have been surprising if HMRC's failure to tax FBTOs correctly between 2002 and 2005 had opened the door to a claim for a VAT refund in relation to supplies that had been correctly taxed".

PKF director of VAT, Richard Wild, welcomed the news: “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."

“While claims for periods between 1996 and 2003 and after 2005 are probably ruled out, today’s judgment could mean that substantial claims lodged for periods prior to 1996 will finally be paid. However, HMRC may yet seek to wheedle its way out of repaying these older claims to try to save cash, even though it has lost the argument on the main VAT principle involved," Wild added.

An HMRC spokesman told AccountingWEB that it 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."

Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.