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FOBT Row Lingers On as Bookies Set for £1bn Tax Refund Windfall

Slot MachineThe debate over fixed odds betting terminals (FOBT) raged on for months, with the end result being former Culture Secretary Matt Hancock imposing a maximum stake of £2 to prevent – or at least slow down – the huge losses that some punters were racking up on the machines.

The bookmakers were naturally outraged, given that one of their major revenue streams was being restricted, and the implications for a wider range of stakeholders, including UK horse racing, confirmed that a significant amount of turnover would be lost in the legislative shake-up.

There has been some good news for the bookies this week, however….

Betfred vs HMRC

In a landmark court case, Betfred went up against HMRC in a bid to reclaim VAT payments on FOBT that had been erroneously paid by the bookmaker.

The tribunal confirmed that the payments made between 2005 and 2013 had ‘breached the principle of neutral fiscality’, as Betfred’s legal team argued that similar games played in land-based and online casinos were not subject to such taxation. They all ‘met the same need from the point of view of the customer’, the courts ruled.

Industry sources, as revealed in The Guardian, suggested that Betfred had trousered £100m in repaid VAT payments; assuming the HMRC is unsuccessful with any appeal plans.

And that figure suggests that the UK betting industry as a whole could be in for a whopping £1bn payday following the conclusions of the case.

Betfred’s managing director, Mark Stebbings, was unsurprisingly pleased with the outcome. He said: “We welcome the decision regarding the historical tax treatment of fixed odds betting terminals, which pre-dates the introduction of machine games duty in February 2013. It does not concern Betfred’s ongoing tax liabilities.”

And Now for the Bad News….

As is often the way in such cases, the Treasury will need to find a way to plug that £1bn hole in their budget.

And the early indications are that they will increase tax on online gambling to help cover the short fall.

They have also decided to delay the imposition of the new FOBT maximum stake until April 2020; a decision that has been met with much criticism from campaigners. The postponement would allow the Treasury to continue taking a higher level of tax revenue from the machines, which is expected to total approximately £1.8bn each year.

The government has already announced plans to squeeze extra cash out of the industry by raising remote gaming duty; a hike believed to be from the current 15% up to 25%. That would specifically target operators that market their online casinos and gaming sites to UK players.

And industry analyst Warwick Bartlett, who owns Global Betting and Gaming Consultants confirmed that he suspected a significant rise in machine games duty (MGD) would follow.

“The hike in MGD to 25% will no doubt cover the repayment due,” he said, referring to the delay in FOBT maximum stake implementation. “Unless of course the Department for Digital, Culture, Media and Sport decides to impose the £2 stake limit earlier than anticipated.”