British Bookmakers Receive £1 Billion Tax Rebate on FOBTs
British bookmakers stand to receive a £1 billion tax rebate after a UK court ruled that the gaming operators had been charged too much value-added taxes (VAT) on revenue from fixed-odds betting terminals (FOBTs). The case was filed by longtime British bookmaker Betfred against HM Revenue & Customs.
The court victory is a major boon to the FOBT shops, which has been trying to cop with a decision by the UK government to slash the maximum bet on fixed-odds betting terminals from £100 to £2 per bet. The tax tribunal ruled that HM Revenue & Customs had “breached the principle of fiscal neutrality” by offering exemptions to similar roulette-style games played in land-based and online casinos.
The overcharged VAT on FOBT machines took place between 2005 to 2013, according to the tribunal. An HMRC spokesperson would not say whether the British tax department would appeal the decision. The spokesperson only said, “This is an important judgment and HMRC is giving it careful consideration.”
The decision brought new criticism from UK groups who believe the FOBT betting shops are predatory. Critics want the UK government to reverse its decision to delay implementation of a chance in FOBT bet maximums, but that is unlikely to happen.
HM Revenue & Customs Statement
If HMRC does not appeal the decision or the appellate decision goes against it, then the total cost to the British government would be an estimated £1 billion. The court’s estimated was based on total 2005-2013 payments, which totaled £8 billion plus interest. Betfred alone would collect £100 million in the judgment.
Gaming analysts and financial experts had speculated that the upcoming decision by the tribunal might have been the reason the UK government delayed implementation of the FOBTs bet limits until April 2020. The decision was much-criticized by politicians like Carolyn Harris and everyday British citizens, because of the controversial nature of fixed-odds betting terminals.
FOBT Implementation Delayed
The government already planned to offset revenue loss from the FOBT decision by charging higher taxes on online gambling. The delay in FOBT implementation allows the UK government to soften the blow from the VAT decision, because the government would be able to collect higher taxes from the the £100-maximum FOBT machines until early 2020.
The decision to delay the new bet maximum policy is a boon to British bookmakers, who are thought to make roughly half of their yearly revenues of £1.8 billion from FOBT winnings. The betting terminals are by-far the bookmakers’ biggest revenue generators, which is why so many activists groups and Labour MPs fought to lower the maximum bets on the machines.
Critics of UK FOBT Policy
Labour MP Carolyn Harris said of the decision to delay, “I am incensed by this news and frustrated that due to recess we can’t bring the chancellor to the house to answer questions. If this government is guilty of playing Russian roulette with the lives of problem gamblers by holding off introducing the cut in FOBT stakes, as a sweetener to protect the Treasury from the wrath of the bookies, it will be beyond belief.”
“If the bookies have this kind of power over the chancellor then this government is in more trouble than any of us can imagine.”
Matt Zarb-Cousin of Fairer Gambling agreed with Carolyn Harris. Zarb-Cousin recommended the government react to the tax tribunal’s decision with actions of its own, saying, “Instead of giving the bookies a double win, Treasury should instead put the tax for remote [online] gambling up to at least 25% in the budget this year and enact a £2 stake on FOBTs by April 2019.”
Fred Done and Betfred Bookmaker Shops
Betfred’s septugenarian billionaire owner, Fred Done (pictured above), has been a target of vitriol over the FOBT issue in the past few years. Betfred was founded in 1967 by Fred and Peter Done as a single betting shop in Ordsall, Salford. Since then, the company has grown to include over 1,350 betting shops throughout the United Kingdom.
Betfred launched a successful online bookmaker site in 2004, then leveraged the revenues to buy a 7-year monopoly on the Tote pool bettors service in 2011 with a £265 million bid. The Tote previously had been a state-run betting pool monopoly.
Betfred Tote Service Pullout
When the monopoly runs out in 2018, Fred Done said he is closing 49 of 51 of his Tote shops at British racetracks. Done’s decision came after the 54 racetracks decided to end the 90-year monopoly on Tote betting pools. Saying he would keep only betting shops at Ascot Racecourse and Betfred-owned Chelmsford City Racecourse, Fred Done said, “We won’t be represented on any [other] courses. Several racecourses are really disappointed we aren’t staying, but I won’t stay where I’m not wanted.”
“If anything, the regret I have about not being on racecourses is that our association with racing is broken now and will be finished next year. But that’s not business, it’s sentimental.”
The Betfred CEO is not likely to receive much sympathy, especially after a court decision will put another £100 million in his pocket.