HMRC appealed at the European Court of Justice (ECJ) against a High Court ruling concerning Rank, dating back to 2009, that said the casino operator should receive £26m it had overpaid in VAT on gaming machines between 2002 and 2005.
The 2009 ruling led to hundreds of pub operators and licensees receiving tax rebates on overpaid VAT from the taxman.
However, operators faced the prospect of having to pay back their reclaimed VAT payments if the ECJ ruled in favour of HMRC.
The High Court said the fact that VAT had been charged on some machines — including category C AWP machines used in pubs — and not others had broken EU competition law.
The ECJ broadly agreed, said that having different VAT charges on different types of machines that offer identical or similar services for customers represents an “infringement” of the principle of fiscal neutrality.
The case will now return to the domestic courts to consider its position in light of the ECJ judgement. In the meantime, HMRC must now decide what action it takes. “HMRC is studying the judgment and will issue further advice once the potential implications have been identified,” it said in a statement.There had been concerns that if the ruling had gone in favour of HMRC, tenants and lessees of major pubcos could have been forced to pay back money they hadn’t received.
A number of pubco agreements split the income of AWP machines 50:50 between the pubco and tenant — meaning any VAT refunds have been split down the middle.
In cases where the full refund has been sent to the licensee, HMRC had confirmed it will pursue the individual licensee for the full amount and not the pubco for their 50%.