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HM Revenue and Customs Brief 40/09


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Issued 14 July 2009

VAT: The decision of the High Court in respect of Rank (mechanised cash bingo and gaming machines)

The High Court issued its decision in this case on 8 June 2009 – the judgment being in Rank’s favour. It confirmed that there had been a breach of fiscal neutrality in the tax treatment of the supply of mechanised cash bingo (MCB). This means that participation fees for playing MCB should have been exempt from VAT and businesses can now submit claims to HM Revenue & Customs (HMRC) for repayment of any output tax wrongly accounted for, subject to the guidelines below.

In relation to gaming machines, the High Court judgment relates to an appeal against an interim ruling of the VAT Tribunal. As the Tribunal has not yet ruled in respect of Rank’s full appeal, HMRC will not at this time consider any claims relating to this issue.


Rank, which operates Mecca bingo halls, claimed there had been inconsistencies in the way VAT had been applied to the participation fees customers paid to play MCB and to the takings of gaming machines.

Last year the VAT Tribunal ruled there had been a breach of fiscal neutrality in the case of MCB as some participation fees were taxed while others were exempt. (Fiscal neutrality means that similar supplies must be treated the same for tax purposes to avoid any distortion of competition). The High Court has agreed with the Tribunal’s decision that all participation fees for MCB should have been exempt from VAT.

The VAT Tribunal also issued an interim decision regarding the way HMRC taxed gaming machines, stating there had been a breach of fiscal neutrality in some cases and over a short period of time before the law was changed in December 2005.

Implications of this judgment

HMRC will now consider claims for output tax wrongly accounted for by bingo operators on MCB participation fees.

As bingo duty is charged on the VAT-exclusive value of participation fees, this judgment will have an effect on bingo duty declarations although HMRC is still considering the precise implications. However, HMRC will now enforce those bingo duty assessments already made. Further assessments to bingo duty may be made as appropriate.

As the gaming machine case is continuing, with a VAT Tribunal hearing later this year, HMRC will not credit any claims on this issue.

Making claims or adjustments

Where a business wishes to make a claim to HMRC for output tax wrongly accounted for in respect of MCB participation fees, they may do so, although evidence must be produced that output tax was accounted for, to substantiate the amount claimed.

All claims will be subject to the four-year time limit in section 80(4) of the VAT Act 1994 (as amended) and no claim for periods ending on or prior to 31 March 2006 will be considered.

Correcting the error on your VAT return

Overdeclarations of output tax can also be corrected by adjusting the current VAT return if the net amount of all errors in the accounting periods being corrected is:

  • £10,000 or less; or
  • less than £50,000 and less than 1 per cent of the box 6 figure on the VAT return in which the adjustment is being effected

These de minimis levels apply to the entire ‘claim’. Thus if your ‘claim’ is for ten accounting periods, it is the net overdeclaration for all ten periods that must be within these levels.

Under regulation 34(1A) of the VAT Regulations 1995 (as amended), all adjustments must be made within four years after the end of the accounting period in which the overdeclaration was made but no accounting period can be adjusted if it ended on or before 31 March 2006.

Further information

Details of where to send your claim can be obtained from update 2 to VAT Notice 700/45 - How to correct VAT errors and make adjustments or claims from the HM Revenue & Customs National Advice Service on 0845 010 9000.

HMRC may reject all or part of a claim if repayment would unjustly enrich the claimant. More details on ‘unjust enrichment’ can be found at part 14 of VAT Notice 700/45 How to correct VAT errors and make adjustments or claims.

There may be direct tax implications where amounts of overdeclared output tax are repaid to businesses and your attention is drawn to R&C Brief 14/09 issued previously.

Where you are in any doubt about the correct treatment please contact the National Advice Service.

About the Author

© Crown Copyright 2009.

A licence is need to reproduce this article and has been republished for educational / informational purposes only. Article reproduced by permission of HM Revenue & Customs under the terms of a Click-Use Licence. Tax briefs are updated regularly and may be out of date at time of reading.

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Article Published/Sorted/Amended on Scopulus 2009-07-18 21:32:34 in Tax Articles

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