Pubs in line for fruit machine tax windfall

Pubs could hit the jackpot after a court ruling paved the way for huge rebates in overpaid VAT on games machines.

At the High Court earlier this month bingo hall owner Rank Group won a case that could see it land £26m.

The case stems from 2005 when the Treasury, following European guidelines, ruled it was unfair that pubs had to pay VAT on machine income but arcades did not.

Pubs were then given a window of opportunity to reclaim VAT paid before that date.

Details of the ruling were unveiled by the Federation of Licensed Victuallers Associations (FLVA) prompting members to apply for rebates.

Shaun Rennison, former FLVA president, applied for a rebate at the three pubs he owned at the time and could be in line for £11,000.

He said: "This is good news certainly for people who applied and considering the current economic climate."

Pub companies including Mitchells & Butlers (M&B) and Whitbread are among those that could be in line for millions of pounds following the ruling.

But a Whitbread spokeswoman warned that the wait could still go on.

She said: "It has taken four years so far and if HMRC appeal as expected it will drag on for longer."

An M&B spokesman added: "This is potentially good news but it is a very technical process and we don't expect the claim to be finalised until October."

A spokesman for HMRC said it had yet to decided whether or not to lodge an appeal against the ruling.

He said: "We are studying the court's decision in detail as there are some important legal points to consider before deciding our next course of action.

"The High Court's decision affects all suppliers of mechanised cash bingo and we will be issuing a Revenue & Customs Brief shortly advising on how any overpaid VAT can be claimed."

Pubcos including JD Wetherspoon and Enterprise Inns are also understood to be lodging claims. A Punch Taverns spokeswoman said it would wait to see if HMRC appealed before taking further steps.

She said: "Punch wrote to all of its lessees and tenants in 2006 outlining that there was a possibility of reclaiming the VAT paid on AWP machines and that we would be prepared to process their claim on their behalf. We now need to wait to see if an appeal is lodged before taking further steps. In the meantime, we will continue to update our licensees on the situation."

In total the leisure industry could be due a rebate of around £500m.