At the end of the financial year, there is that window of opportunity where we hope that the HMRC is going to contact us to deliver the wonderful news that we are due a tax refund.
For most of us, however, the call never comes.
The big cheeses at the GVC Holdings betting group and William Hill found themselves in a similar position, but to secure the tax refund that they were owed they had to take Her Majesty’s Revenue & Customs to court.
And after a lengthy legal battle, the hammer came down on the side of the gambling operators – forcing HMRC to pay out a whopping £350 million refund on overpaid tax!
Righting Wrongs
The case was brought over the amount of tax that the firms were paying on their Fixed Odds Betting Terminals (FOBT), with GVC and William Hill claiming that HRMC had forced them to overpay to quite some tune.
And the High Court agreed, stating that before the HMRC changed their VAT policies back in 2013, they had made no distinction to the ‘supply of games’ – thus charging betting firms incorrectly.
The tax tribunal, which heard the case from both sides, found that the brands had been overcharged for VAT for as long as EIGHT years – hence the sizeable sum paid out. HMRC will not be appealing the decision.
William Hill was the first cab off the rank, and in a statement confirmed they would be looking to claim a rebate of between £125 million and £150 million. “As a result of this announcement, we will now engage with HMRC to agree the support for, quantum and timing of the refund,” it read, using the word ‘quantum’ for the first time since the 1800s. “The board has considered a number of scenarios which suggest a potential net cash recovery of between £125m and £150m.”
GVC, who own the likes of Ladbrokes and Coral, didn’t release an official statement, but they did confirm they expect to claim a refund in the region of £200 million.
Fred Gets It Done
Credit: AlexRotenberg / bigstock
This isn’t the first time that the HMRC has been taken on by a bookmaker.
Between 2005 and 2013, the tax agency had to defend itself against Fred Done, the owner of Betfred, and the Rank Group, whose brands include Mecca Bingo.
In those cases, the presiding judge found that the HMRC should NOT have been charging VAT on profits made via FOBT machines. They determined that FOBTs should be treated the same as roulette wheels in the casino and other such games, which are exempt from tax.
They were able to claim for the period up to January 2013, when the VAT policy was changed by the government agency.
That landmark ruling had something of a snowball effect on the gambling industry, with more and more firms taking their opportunity to tackle HMRC head on. GVC said: “GVC Holdings PLC has learned that the UK tax authority, Her Majesty’s Revenue & Customs, has taken the decision not to appeal the ruling of the Upper Tribunal (Tax and Chancery Chamber) in the cases of the Done Brothers (Cash Betting) Ltd (trading as Betfred) and Rank Group Plc concerning the application of VAT to certain gaming machines and fixed odds betting terminals within licenced betting shops.”
A Timely Boost
As you can imagine, the news of the tax rebate could not have come at a better time for these businesses.
Covid-19 has laid waste to the sporting fixture list, which of course is the main revenue stream for William Hill and co, and their profits have taken an almighty hit accordingly. Indeed, Hills have reported a 57% decrease in revenue in the seven-week period to the end of April, and that each full month that their betting shops were shut cost the firm around £15 million.
Gambling firms had been hit when the maximum stake on FOBTs was cut from £100 to £2, and that harmed profits considerably – the tax rebate provides some cover for that.
William Hill Share Price (May 2020)
As the news broke of William Hill’s winning claim against the HMRC, their share price claimed 6% after a period of consistent downturn. Their position has also been aided with the slow return of sport, with a number of key football leagues and horse racing set to return in the coming weeks.
They have announced plans to reopen their betting shops in a ‘phased resumption’ in the second half of 2020, pending government approval.
