Hope for pub AWP tax windfall

Licensees and pub operators could claim some of the £500m windfall in overpaid VAT on gaming machines after a landmark High Court ruling.

 The judge ruled that bingo club and casino operator Rank should receive £26m it had overpaid in VAT on gaming machines between 2002 and 2005. It also reclaimed £59.1m paid in VAT on interval bingo.

 VAT had been charged on some machines — including category C AWP machines used in pubs — and not others, which broke EU competition law.

 The judge said there are 1,000 similar claims outstanding. This includes those from managed and tenanted pub companies, which had been waiting for the ruling before claiming refunds from HM Revenue & Customs (HMRC).

 Accountancy firm Deloitte estimates that £500m could be paid out across the leisure industry as a result.

 Tony McClenaghan, senior indirect tax partner at Deloitte, which advised Rank, said: "Other organisations in the leisure industry should consider their own grounds to submit claims for overpaid VAT and interest to HMRC following the guidance laid down by the High Court."

 Barney Horn, also of Deloitte, said the ruling would only apply to VAT paid up until December 2005, when the tax was required for all machines.

 He said it's understood that claims must have been lodged already, although "there are arguments that there may be scope for new claims".

 Horn said it also depends on whether HMRC goes to the Court of Appeal — it has until 29 June to do so.

 "Every major pub chain, certainly managed chain, would have submitted a claim already. I've no doubt that a number of tenanted [operators] have put in claims for their tenants."

 However, John Powell, chairman of the independent gaming machine operators group IOA, doubted the ruling would benefit pubs.

 He feared any advantage would be mitigated when a proposed new tax regime for machines, based on the gross profit, is implemented. Details of the new tax are due to be released in a consultation shortly.

 Powell also said it would be "incredibly difficult" for most licensees to make a successful claim because of the amount of information needed.