High Court award Mecca a £59 million VAT refund

This is a landmark decision not just for Mecca Bingo but for all UK based bingo operators who have been fighting high bingo taxes which when combined with the smoking ban and a bad recession have hit the whole industry hard and resulted in many club closures and job losses. Bingo is taxed at a whopping 22% compared to 15% for other gambling actives which led the Rank Group taking the legal route to try and even the odds. This decision could cost the Revenue and Customs a whole lot more as over 1000 claims have now being made against them for  breaching fiscal neutrality rules which make up a major part of the European Union Free Trade Association.

Tony McClenaghan, senior indirect tax partner at Deloitte the major international accounting and consulting firm who have been advising the Rank Group said "This is a landmark decision endorsing one of the most important principles of Community law, fiscal neutrality. This underpins fair and effective tax policy. It remains to be seen whether HMRC will appeal the decision, however, the decision of both the VAT Tribunal and the High Court are clear and unequivocal and we would expect the Court of Appeal to share this view.

"The same principles should apply to any taxpayer which has paid VAT on the income from these activities. 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 in this ruling."

The interval bingo appeal concerned identical supplies of bingo games, one played under s.14 of the Gaming Act 1968 and one played under s.21 of the Gaming Act 1968, the former being subject to VAT, and the latter being exempt from VAT. It was common ground that the games were identical and therefore HMRC failed to persuade the High Court that there was any objective basis for the differential in tax treatment. This resulted in a breach of fiscal neutrality.

The gaming machines appeal, referred to as the 'Slots appeal', concerned supplies of certain gaming machines which were subject to VAT, and other similar gaming machines, which were comparable, which were treated as exempt from VAT. This also caused a breach of fiscal neutrality and distortion of competition. HMRC amended the law in 2005, to tax all of these gaming machines.

Barney Horn, indirect tax partner at Deloitte, said: "This decision upholds the principles set out by the European Court of Justice in the Linnewebber case. This requires the same or similar services to be treated in the same way for the purposes of VAT. Both the VAT & Duties Tribunal and now the High Court have accepted this argument and upheld Rank's claim for overpaid VAT."

Her Majesty's Revenue and Customs has until tomorrow to appeal the decision made by the Court of Appeal so this may not be the end of the story but you can be sure as soon as we know any more you will read it here first.