Betfred Helps Win £1 Billion Tax Rebate For FOBT Industry

UK bookmaker Betfred has won its case against HM Revenue & Customs (HMRC) after a tax tribunal ruled that the gambling operator should have been exempt from paying VAT on its Fixed Odds Betting Terminals (FOBTs) between 2005 and 2013. The company based its case on the fact that other similar games found online or at casinos were not subjected to the same VAT rules, which was ultimately seen by the court as a breech of ‘fiscal neutrality.’ Following its judgement, Betfred’s managing director, Mark Stebbings, commented:

“We welcome the decision regarding the historical tax treatment of FOBTs, which pre-dates the introduction of machine games duty in February 2013. It does not concern Betfred’s ongoing tax liabilities.”

£1 Billion Rebate

The case does not just impact Betfred, as UK bookmakers are believed to have paid HMRC a combined £8 billion in taxes over the nine year period. Providing that HMRC does not appeal the ruling and have it overturned, Betfred can subsequently expect to reclaim around £100 million by way of a VAT refund, with other operators in the FOBT space, such as William Hill, Paddy Power Betfair, and Ladbrokes Coral, also in line for huge payouts amounting to around £1 billion in total.

Breached European Tax Law

While UK bookmakers paid a 15% betting duty on their FOBT profits from 2005-13, they were also subjected to a further 20% VAT rate during the time period, which Betfred correctly pointed out was in breach of European tax law. In 2013, HMRC subsequently removed VAT from FOBTs, replacing it, instead, with a ‘machine games duty’ set at 20%, which has since increased to 25%.

Importance of FOBTs

UK high street bookmakers have become heavily reliant on FOBTs over the past few years, with these machines generating around £1.8 billion a year for the industry, representing more than half of their overall revenues. Nevertheless, FOBTs have also attracted a great deal of criticism from anti-gambling campaigners, ultimately leading to the UK Gambling Commission’s decision earlier this year to reduce their maximum stake from £100 to £2 per spin.

Needless to say, the government also stands to lose valuable tax revenues by the decision, and has since decided to delay implementation of the new rules until April 2020. Its decision, however, has drawn further criticism from gambling concern groups, who accuse it of being influenced by gambling lobbyists.

Anti-Gambling Campaigners Upset

One of the politicians expressing her disappointment over the situation is Labour MP Carolyn Harris, who chairs the All Party Parliamentary Group (APPG) on FOBTs. Calling for the measures to be introduced immediately, Harris has accused the government of pandering to gambling operators in favor of the 2 million people in the UK who are either problem gamblers (430,000) or at risk from developing a gambling addiction.

Her view would seem to be borne out by data released in 2016 by the UKGC showing that around 14% of FOBT players were also problem gamblers, representing a much higher level than any other type of gambling vertical in the country. As she explains:

“If this government is guilty of playing Russian roulette with the lives of problem gamblers by holding off introducing the cut in FOBT stakes, as a sweetener to protect the Treasury from the wrath of the bookies, it will be beyond belief. If the bookies have this kind of power over the chancellor then this government is in more trouble than any of us can imagine.”

Government Response

For its part, the government insists that it is committed to implementing its maximum bet allowance in order to protect vulnerable gamblers in the UK, but insists it must be done in an orderly fashion so as to avoid the negative scenarios predicted by bookmakers. The move is already expected to cost thousands of jobs once imposed, while William Hill CEO Roger Devlin has warned that the figure would be nearer to 20,000 jobs had the government introduced the measures in the short term.