David Lucas



The Rank Group Plc v HMRC

David Lucas

On 8 July, the Supreme Court found against The Rank Group plc (‘Rank’) in the latest decision on the long-running litigation concerning the VAT treatment of slot machines between 2002 and 2005.  Further details are below but our high-level observations are:

  • Gaming machine VAT claims for the period 2002-2005 — clearly this loss is a significant blow but the matter is far from dead. A separate Rank case has been remitted to the First-tier Tribunal (FTT) and should now be heard.
  • Condé Nast / Fleming gaming machine claims — these appear certain to fail now but any business that has submitted a claim should take advice based on its specific circumstances.
  • Post-2005 VAT gaming machine claims — this decision has no impact on these claims.


At the heart of the dispute is the EU law principle of fiscal neutrality, which requires that similar goods and services must not be treated differently from a VAT perspective. Prior to 5 December 2005, jackpot machines (Section 31 machines) and AWPs (Section 34 machines) were taxable for VAT purposes but so called Section 16/21 machines (S16/21 machines) and Fixed Odds Betting Terminals ("FOBTs") were treated as being VAT exempt. Rank and other gaming machine operators submitted claims to recover the VAT they had paid on jackpot and AWP machines on the basis that these machines were similar to S16/21 machines and should therefore have enjoyed the same tax treatment.

The issue before the Supreme Court

HMRC had accepted that S16/21 machines were similar to Rank's taxable machines and following a Court of Justice of the European Union ("CJEU") decision, Rank's claims would have succeeded providing the S16/21 machines were correctly treated as exempt.

After Rank's claims were submitted, HMRC changed their position, arguing that S16/21 machines were not exempt. Thus, there was no exempt comparator to Rank's taxable machines. The question for the Supreme Court was, were S16/21 machines exempt as a matter of UK law. Rank's position was supported by the views of the Gaming Board at the time as well as the FTT and the High Court and reflected HMRC's original view of the machines. HMRC's position was supported by the Court of Appeal decision.

In order to decide the issue, the Supreme Court had to consider whether the 'element of chance was provided by means of the [S16/21] machine' even when the Random Number Generator (RNG) in so called 'multi-terminal machines' was housed in a separate part of the premises with the RNG result fed by cable to the terminal being played by the player.

The Supreme Court Decision

In a relatively short judgment (32 paragraphs), Lord Carnwarth delivered a unanimous decision of the  Lords, agreeing with the  conclusion of the Court  of Appeal  "albeit  for somewhat  different reasons".

Although Lord Carnwarth saw some force in Rank's criticism of the Court of Appeal's reliance on arguments of absurdity he noted the Concise Oxford English Dictionary definition of machine as "an apparatus using or applying mechanical power, having several parts, each with a definite function, and together performing certain kinds of work". He went on to equate the roll of a dice by a player (which is the means by which chance is provided in a dice game) with a player on a machine pressing a start button to contact the RNG.

Thus the element of chance was provided "by means of” the player pressing the start button to contact the RNG. Taking these points together and in the context of the apparent policy of the legislation (both gaming and VAT) he concluded it is a 'fair use of language to describe the element of chance as "provided by means of" the terminal'.


In May this year we reported on the Court of appeal decision in Littlewoods which successfully argued that taxpayers who have overpaid VAT should be entitled to interest calculated on a compound rather than simple basis.  In the case of Littlewoods this meant a substantial increase in the amount due from HMRC.  By way of an update, HMRC has confirmed that it has appealed the Littlewoods decision and will not settle claims with any other businesses.

We recommend that members who submitted appeals for overpaid bingo and slots claims should continue to maintain current claims and appeals and for members that have not yet protected their position, they should submit claims wherever appropriate.

Frequently Asked Questions

What does this judgment mean for the remitted Tribunal case about FOBTs?

Following the CJEU judgment, the Upper Tribunal decided to remit Rank's case in relation to FOBTs back to the Tribunal. This was on the basis that the CJEU had given further guidance on the principle of fiscal neutrality and in particular, the tests that should be used to determine whether supplies are "similar". These proceedings were stayed pending the outcome of the Supreme Court decision. Justice Norris said that the case should proceed using all of the evidence from the original hearing including transcripts. Subject to any other direction of the FTT no other evidence will be introduced. It is unlikely that the case will be heard until this time next year (at the earliest). We still consider 2002-5 claims are likely to suceed.

What does this judgment mean for Condé Nast slots claims?

These now appear to have no likelihood of success.  However, before withdrawing any claims, advice should be sought based on your own specific circumstances.

What does this judgment mean for S16/21 assessments for VAT and AMLD?

To date HMRC have not enforced these assessments pending the outcome of Rank. We believe that HMRC are likely to continue this policy until all of the Rank litigation has concluded but we cannot be certain of this. HMRC may yet reconsider their view on whether taxpayers had reason not to pay these assessments on grounds of "misdirection" or "misunderstanding" as businesses were simply following written HMRC policy. If HMRC do try and enforce the assessments at least one taxpayer has a Judicial Review claim lodged against HMRC.

What does this judgment mean for post-2005 gaming machine claims?

These claims are not affected by the decision. It is likely that further litigation will be required and we understand that two cases are progressing towards the FTT. If either wins, many claims should succeed and we are confident that there are strong chances of success.

What next?

In due course, HMRC will no doubt publish their views on the case. However, this may not be immediate —the Revenue & Customs Brief on the impact of the Court of Appeal decision took over two months to be published.  We will update you if we hear anything further but in the meantime, if you have any questions, please contact us on bingoassociation@deloitte.co.uk for advice. We will endeavour to keep you informed of any relevant updates.



Sitemap | Ask a question | Careers | Accessibility | Terms of Use | How we handle your data

© 2020 Fraser Brown Solicitors. Authorised and regulated by the Solicitors Regulation Authority.
SRA Number: 0048586   |SRA |  VAT Number: 116 4751 78

Fraser Brown is a partnership of limited companies. Any references to partners in any document should be taken as being references to the directors of the limited companies and not to individual partners of the firm.