Pub trade faces paying back 'hundreds of millions' in overpaid tax rebates

HMRC confirmed the figures after it issued a statement last week claiming it would be pursuing pub operators. This followed a Court of Appeal decision concerning the Rank Group last October relating to VAT on gaming machine takings. 

Back in 2009, a High Court ruling led to hundreds of pub operators and licensees receiving tax rebates on overpaid VAT.

It said the fact VAT had been charged on some machines — including category 'C' AWPs used in pubs — and not others had broken EU competition law.

HMRC appealed​

HMRC appealed at the European Court of Justice (ECJ) but it agreed that having different VAT charges on different types of machines represented an “infringement” of the principle of fiscal neutrality.

However, the latest ruling in the Court of Appeal agreed with HMRC that the multi-terminal betting machines should have been taxable.

Recovery action​

According to the Government department all businesses that made a valid claim and received a repayment were advised that, in the event of HMRC being successful in litigation, recovery action would be taken.

A spokesman for HMRC said: “The Court of Appeal agreed with HMRC’s arguments regarding the taxation of multi-terminal betting machines. These will now fall within the definition of gaming machines, and be taxed in the same way. 

“Companies that claimed a VAT rebate will be asked to repay the money received. All companies were told when claiming that this would be the case if HMRC won the appeal, which is in line with standard practice.”  

HMRC to write to businesses​

HMRC said it will write to every affected business in the next few weeks, setting out the amount it received. The letter will include guidance about how to repay the money. In the event of a business being unable to make the full payment by the due date, it should contact HMRC.

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 confirmed it will pursue the licensee for the full amount and not the pubco for its 50%. If a pubco has claimed on behalf of the host, the pubco will be liable to refund the tax.