Taxation and Gaming Machines - HMRC - v - Rank Group PLC - Developments
2013
In October two decisions were handed down concerning the taxation of certain gaming machines which has been the subject of lengthy litigation between the HMRC and the Rank Group PLC.
The cases are referred to as Slots 1 and Slots 2 and deal with distinct issues, both of which will ultimately impact upon the taxation of the machines in question.
Slots 1 focuses on how the result of the games are determined and whether that affects the type of machine from a VAT perspective.
The argument in Slots 2 revolves around what Rank perceives as similarities between the two machines; the disputed machines in this case are Fixed Odds Betting Terminals ("FOBT's"), which are machines found in betting shops. Rank argued that FOBT's are similar to gaming machines (ie section 31 and 34 machines). The Court of Justice of the European Union has confirmed that when assessing, for the purposes of fiscal neutrality, whether two types of slot machine are similar and require the same treatment for VAT purposes, it must be established whether the use of those types of machine is comparable from the point of view of the average consumer. Factors to be taken in into account include the minimum and maximum permitted stakes and the chances of winning. Rank argues that the different approach to taxation for these 'similar' machines offends this principal.
Although the recent decisions are of interest they are, in reality, just another step along the path. In the case of Slots 1, Rank have applied for leave to appeal to the Supreme Court.
There is some considerable distance left to run in these cases before a final decision (destination) is reached.
The recent decisions:
Slots 1 - 30th October 2013 - HMRC -v- The Rank Group PLC - [2013] EWCA Civ 1289
Takings from a system of slot machines served by a single, separate random number generator were not entitled to the exemption from VAT for gaming activities applicable between October 1, 2002 and December 5, 2005. Each slot machine terminal and linked random number generator was a "gaming machine" within the Value Added Tax Act 1994 Sch.9 Group 4 Item 1 Note 3.
Slots 2 - 4th October 2013 - HMRC -v- The Rank Group PLC -[2012] UKUT 347 (TCC)
Following the decision of the European Court of Justice in Revenue and Customs Commissioners v Rank Group Plc (C-259/10) [2012] S.T.C. 23, the Upper Tribunal quashed and remitted a decision of the First-tier Tribunal that gaming machines operated under the Gaming Act 1968 Pt III and betting machines known as "fixed odds betting terminals" were so "relevantly similar" that their differential VAT treatment was a violation of the principle of fiscal neutrality.