Tax refund of 100 million pounds granted to Betfred in light of FOBT decision.
Significant win for Betfred and the FOBT industry, but it serves as a reminder of the need for a comprehensive review of gambling taxation in the UK. The fact that FOBTs were taxed differently than similar online games for eight years is a clear sign of the inconsistencies in the current system. It's crucial to ensure that all types of gambling are subject to the same taxation rules to eliminate any unfair advantages or disadvantages.
After a court error, UK bookmaker and FOBT operator Betfred has won a case against HM Revenue & Customs (HMRC). Several other betting companies in the UK hope to receive refunds of approximately 1.9 billion pounds (€112 million) each.
Betfred, headquartered in Warrington, won the initial case in court against HMRC on the grounds of incorrect VAT taxation on FOBT winnings, and is likely to receive a refund of around £100 million (€112 million). The company's CEO, Mark Stebbings, called it a "historic decision" for FOBT shops in the UK.
FOBTs (Fixed-Odds Betting Terminals) do not only offer traditional slot machines but also classic casino games such as digital roulette or blackjack, and charging VAT on FOBTs between 2005 to 2013 defied the principle of tax equality, according to the Supreme Court. Similar gambling types (for example, online roulette) were tax-exempt during that period.
In his lawsuit, Betfred specifically highlighted this issue. In addition, they argued that the VAT, instead of aligning the taxation, was gradually increased from 15% in 2005 to 25% in 2013. Betfred, one of the UK's largest bookmakers, generates around 83% of its revenue from stores with FOBTs.
This tax ruling could serve as a precedent for all FOBT operators before the introduction of the Betting Machine Duty in February 2013. If other companies also assert their entitlement to this sum, refunds of about £1.9 billion (€2.1 billion) could be possible. HMRC has not yet commented on any possible appeals, but they plan to give "thorough consideration" to the ruling.
Since their introduction in 2001, FOBTs have been notorious for allowing users to lose up to £100 per spin on slot machines. Critics refer to them as "crack cocaine" among slot machines, as they have faced criticism for years. The terminals generate up to £1.8 billion annually in the British betting industry. DCMS minister Matt Hancock recently referred to them as a "social disgrace".
Starting mid-July, the UK government surprisingly announced the suspension of the £2 limit for Fixed Odds Betting Terminals (FOBTs) until 2020. This sudden revocation occurred due to an estimated budget deficit of around 400 million pounds. While Betfred's legal victory is celebrated by the UK industry as a "big win," it has also brought out potential critics, such as Matt Zarb-Cousin, a spokesperson for the gambling protection organization Fairer Gambling.
He stated, "This is a significant triumph for Betfred and the FOBT industry, but it's also a reminder of the need for a thorough review of gambling control in the United Kingdom. The fact that FOBTs were taxed differently than similar online games for eight years is a clear indication of the irregularities in the current system. We must ensure that all forms of gambling are subject to the same tax regulations to avoid potential advantages or disadvantages."
In lieu of granting bookmakers a double profit, the tax for online gambling should be increased to at least 25% and a FOBT £2 limit should be imposed by April 2019 at the latest.
John White, CEO of the trade association BACTA (British Amusement Catering Trade Association), criticizes the double advantage that FOBT operators in the UK received from the court ruling. In a British newspaper, The Guardian, White urges the British government to take stronger action:
"The delay between the announcement of the £2 limit and its implementation is clearly excessive. There are no technical reasons for this. It only threatens vulnerable individuals. The government made the correct decision - and now we implore them to expedite this process."
White's remarks reflect the fact that the British government had agreed to a drastic reduction of 98% in terms of FOBT betting limits in May. In light of this, the Betfred tax ruling can only be viewed as another obstacle in the ongoing debate about FOBTs. Labour MP Carolyn Harris shares this perspective, expressing her discontent in a pointed statement:
"I am enraged and frustrated - this government is risking the lives of problem gamblers by delaying the implementation of FOBT stakes for the sake of protecting the Treasury from bookmakers' displeasure. This is inconceivable. If bookmakers have this much influence over Parliament, then our government has more problems than we can imagine."
It remains unclear whether HMRC will appeal the Betfred's 'victory' in the second instance, nor is the future direction of the UK government under Theresa May certain, who is currently on summer break. BACTA CEO John White also suspects that the Betfred decision may lead to a rat's tail that could divert the government's focus from the pre-planned FOBT limitation. Therefore, it seems unlikely that the British FOBT debacle will come to an end in the near future.
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