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Rank wins second Customs case
Published:  01 February, 2010

Following successful Court decisions last year at the Tribunal and earlier this year in the High Court in its on-going litigation concerning the tax treatment of betting and gaming, The Rank Group Plc (Rank) has won a second case against HM Revenue & Customs (HMRC). 

Tony McClenaghan, senior indirect tax partner at Deloitte, who advised Rank, stated: “This is a very welcome decision following on from earlier victories at the Tribunal and in the High Court.  We have always been confident that there was a breach of fiscal neutrality in the differential treatment of the relevant gaming machines and we welcome the Tribunal’s confirmation of this fact.  Taxpayers affected by this decision should now consider making claims for overpaid VAT.”

In a complex case challenging the fiscal treatment of certain supplies of gambling, the Tribunal allowed Rank’s appeal on the basis that there had been a breach of the EC principle of fiscal neutrality.  The principle of fiscal neutrality prevents a Government treating similar goods or services differently for VAT purposes. 

This breach of fiscal neutrality occurred because of the differential VAT treatment of jackpot machines which were subject to VAT and other similar machines, such as fixed odd betting terminals (FOBTs) which were not subject to VAT, prior to 2005.  The Tribunal found that the machines were similar and that as a result the jackpot machines should not have been subject to VAT.

Further, HMRC had sought to argue that once they became aware of the different treatment of similar machines they had acted with “due diligence” to ensure compliance with fiscal neutrality by changing the law to uniformly tax the relevant machines in 2005.   The Tribunal found that there was no defence of “due diligence” available to the United Kingdom for a breach of fiscal neutrality but, even if there had been, on the facts of this case the United Kingdom had not acted with due diligence.

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