Betfred FOBT Case

Betfred Win Court Case Over VAT on FOBTs

Fixed Odds Betting Terminals have long been a cause of controversy, but that is set to take another twist after the bookmaker, Betfred, won a case in court over the fact that they were charged Value Added Tax on revenue from the machines. The court has found in favour of the Manchester-formed bookie at the expense of Her Majesty’s Revenue & Customs, which will be seen as a landmark moment for the betting industry.

The betting industry has been struggling to figure out where to go in the wake of the government’s decision earlier this year to reduce the maximum stake playable on FOBTs from £100 to £2. Some have already closed down high street stores, whilst others are weighing up their options before almost certainly doing the same thing. This decision could make a big difference to the future of some bookies.

Betfred’s Legal Challenge

Betfred launched a legal challenge to Her Majesty’s Revenue & Customs on the basis of HMRC’s decision to implement a 20% Value Added Tax on FOBTs in addition to the 15% betting duty that bookmakers already paid. It was felt that this was a breach of a tax law introduced by the European Union. HMRC themselves removed the VAT and instead introduced a machine games duty in 2013.

The machine games duty started out at 20% but has since risen to 25%, hitting bookmakers with Fixed Odds Betting Terminals hard. It was believed by Betfred, and now confirmed by the court, that the VAT on FOBTs between 2005 and 2013 ‘breached the principle of fiscal neutrality’ as similar games in casinos and online didn’t have to pay the additional tax that was put on Fixed Odds Betting Terminals.

What It Means for the Stake Change

Despite having made the decision to cut the maximum stake to £2 in May of this year, there’s a chance that the change won’t actually happen until April of 2020. That is a move that will please both the government and bookmakers, with the latter benefitting because of the fact that Fixed Odds Betting Terminals account for around £1.8 billion a year in revenue for bookies with high street shops.

The government, meanwhile, is hoping to delay its introduction in order to gain as much tax revenue from the machines as possible. On top of that, the plan is to offset the loss of tax money through an increase in the Point of Consumption tax on online gaming. It will take time for that to be introduced, hence the desire to delay the cutting of the maximum stake from £100 to £2.

Any postponement of the introduction of the new stake limit will also allow the government to cushion the blow of the £1 billion tax rebate that it now faces after the court ruled in favour of Betfred. As things currently stand, HMRC is refusing to confirm or deny whether it plans to lodge an appeal against the decision but a spokesperson said that the idea was being given ‘careful consideration’.

There was lengthy battle over the cutting of the maximum stake on Fixed Odds Betting Terminals, which have been referred to as the ‘crack cocaine of gambling’. The Department for Digital, Culture, Media and Sport called them a ‘social blight’ and the decision in may to cut the stake put an end to the furious arguments. Now it looks as though another set of disagreements are likely to occur on the timing.

Varying Opinions on the Outcome

Matt Zarb-Cousin, who is the spokesperson for the Fairer Gambling campaign, decried the notion of bookmakers being given a ‘double win’ by both delaying the stake cut and paying them more than £1 billion in tax rebates. His belief is that the right way forward is for the Treasury to ‘put the tax for remote [online] gambling up to at least 25% in the budget this year and enact a £2 stake on FOBTs by April 2019’.

Labour MP Carolyn Harris, meanwhile, described how she was ‘incensed’ and ‘frustrated’ that the Chancellor can’t be made to ask questions on the matter because the House is in recess. She said that the government was playing ‘Russian roulette with the lives of problem gamblers’, believing that the government was delaying its decision at the behest of the gambling industry.

Mark Stebbings, the Managing Director of Betfred, explaining that the company ‘welcome’ the decision over historical tax issues. He said that it ‘pre-dates the introduction of the machine games duty’ and in no way concerns ‘Betfred’s ongoing tax liabilities’. For their part, a spokesperson for the Treasury said that the idea that the delay was due to the potential £1 billion hit was ‘completely untrue’.

The government spokesperson said, “We have been very clear that fixed odds betting terminals stakes will be cut to make sure we have a safe and sustainable industry where vulnerable people and children are protected. But we must get this right, so we’re engaging with the industry to make sure it has appropriate time to implement the changes.”

Given the topsy-turvy nature of the debate around Fixed Odds Betting Terminals, it is unlikely that the conversation is going to end here. Whilst the government hasn’t confirmed any plans to appeal the result, it would be unusual if it decided not to and so it wouldn’t be a shock to see this issue in the news again in the near future. It’s also likely that the government will face increased pressure to introduce the FOBT stake cut sooner rather than later.