The First Tier Tribunal ruled on the Rank Group PLC's gambling machines, determining that Fixed Odds Betting Terminals and Section 16/21 machines were similar to Section 31/34 machines in terms of user experience. As a result, treating them differently for VAT purposes violated the principle of fiscal neutrality. The ruling allows Rank's appeal, reflecting that consumer choice is not significantly influenced by the type of machine.

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Case alert
The Rank Group plc
August 2018
Summary
The First Tier Tribunal (FTT) has
released its decision in the case of The
Rank Group plc (Rank).
Rank operated 3 types of automated
gambling machine: Fixed Odds Betting
Terminals (FOBT), section 16/21 and
section 31/34 machines. The issue for
the FTT to consider was whether the
machines were ‘similar’. If so, treating
them differently for VAT purposes would
offend the principle of neutrality.
The CJEU had previously held that the
machines in question fell within the same
category (broadly referred to as slot
machines). However, it was for the UK
court to decide whether the machines in
question were ‘similar’. If so, treating the
income from such machines differently
for VAT purposes would be considered
to offend the principle of fiscal neutrality.
The FTT determined that the correct test
was to examine the betting experience
from the perspective of the user. Would
the user’s needs be equally met
whichever machine was selected?
In examining the evidence, the FTT
concluded that the user experience was
substantially similar and that users would
select machines for a variety of reasons,
often playing machines interchangeably.
On the basis that such factors as
machine location, atmosphere, opening
hours and availability were specifically
stated by the CJEU to be disregarded in
this context, the FTT concluded that the
machines were similar. Accordingly, the
principle of fiscal neutrality was offended.
Rank’s appeal allowed.
First Tier Tribunal
The First Tier Tribunal (FTT) has released its decision in the Rank Group plc case
(Rank). Rank operated a range of machine-based gambling offerings, namely Fixed
Odds Betting Terminals (FOBT), section 16/21 and section 31/34 machines. FOBT
and section 16/21 machines were determined to be VAT exempt, section 31/34
proceeds were excluded from exemption as ‘gaming machines’ and standard rated.
It was concluded by the CJEU that if the machines were ‘similar’ fiscal neutrality
would be offended if there was a difference in VAT treatment between them. The
issue for FTT to decide, therefore, was the ‘similarity’ (or otherwise) of the
machines.
The FTT concluded that the determinative factor was whether the consumer would
perceive differences between the machines that would fundamentally affect their
choice of which one to play. This could include:
• Maximum/minimum pay-out
• Pay-out rate (odds of winning)
• Choice of games
• Level of interaction (extent to which the user could influence the outcome)
The FTT determined that the consumer experience was not significantly different.
Choices between FBOT, 16/21 and 31/34 machines was likely to be determined by
reference to personal taste/preference, mood and tastes and might vary from
occasion to occasion. Type of machine was not significant and differentiating
between actual games available could even result in different games played on a
single machine carrying different VAT liabilities. As players rarely were aware of
pay-out rates and whether machines had pre-determined (software-driven) pay-out
rates or completely random, this was highly unlikely to affect choice of machine.
Payment methods and maximum/minimum pay-outs did not appear materially to
affect playing habits as many players used all the machine types. On this basis, the
machines should be treated equally and different treatment did offend the principle
of fiscal neutrality. Rank’s appeal allowed.
Comment:
This complex series of appeals, stays and referrals have seen this case run
on since 2006. However, once the determining factor had been narrowed
down by the CJEU to one of similarity and this was interpreted by reference
to the customer experience, the FTT reached a logical conclusion.
Stuart Brodie
Scotland
T +44 (0)14 1223 0683
E stuart.brodie@uk.gt.com
Karen Robb
London & South East
T +44 (0)20 772 82556
E karen.robb@uk.gt.com
Vinny McCullagh
London & South East
T +44 (0)20 7383 5100
E vinny.mccullagh@uk.gt.com