Done Brothers – supplies through fixed odds betting terminals exempt from VAT

15 October 2018. Published by Michelle Sloane, Partner

In Done Brothers (Cash Betting) Ltd v HMRC [2018] UKFTT 406 (TC), the First-tier Tribunal (FTT) has held that supplies made through fixed odds betting terminals (FOBT) are exempt from VAT.


Done Brothers (Cash Betting) Ltd, Tote (Successor) Company Ltd and Tote Bookmakers Ltd (the taxpayers) are all members of the Betfred corporate group.

During the period 6 December 2005 to 31 January 2013, gambling services were provided through FOBTs within licensed betting offices and VAT was accounted for on the supplies of these services.

During this period, the provision of facilities for placing bets or playing games of chance was an exempt supply under Group 4, Schedule 9, VATA. However, supplies made through FOBTs were subject to VAT at the standard rate because FOBTs were considered to be ‘gaming machines’ under section 23, VATA, and therefore excluded from the exemption by note (1)(d) of Group 4. Casino roulette, electronic roulette, online gaming and over the counter bets on virtual games (‘the comparator games’) were exempt from VAT.

The taxpayers also supplied the comparator games and were not required to pay VAT on these due to the exemption.   

The taxpayers claimed, under section 80, VATA, repayment of the VAT they had accounted for as the games supplied through FOBTs were similar to the comparator games and therefore the different VAT treatment breached the principle of fiscal neutrality.

HMRC rejected the repayment claims and the taxpayers appealed.

FTT decision

The appeal was allowed in part.

The issue for the FTT to determine was whether the taxpayers' supplies of the FOBT games were similar to one or more of the comparator games for the purposes of the principle of fiscal neutrality.

In considering this question, the FTT followed HMRC v The Rank Group [2011] C-259/10, in which the Court of Justice of the European Union (CJEU) confirmed that two or more games may fall within a single category even where they differ in detail in relation to structure, arrangements and rules. Categories are therefore broader than a specific type of game. The CJEU did not rule out treating games that fell into the same category as different for VAT purposes where it is possible to distinguish the games by differences other than structural details, arrangements, or rules.


The Rank case provides a two stage test when determining similarity. First, it is necessary to establish whether both games fall within the same category due to having similar characteristics. Second, it is necessary to consider whether the games meet the same needs from a typical consumer's point of view. Two games will meet the same needs if their use is comparable and their differences do not have a significant influence on the average consumer's decision to choose one over the other. Only once both of these elements have been satisfied may the games be classed as similar.

The FTT considered each game in turn when deciding whether the games were similar from the average consumer's point of view. Applying the principles identified in Rank to the various games available on FOBTs, the FTT concluded that the average consumer viewed the games on the various platforms as similar and interchangeable. Accordingly, the principle of fiscal neutrality was breached by treating the games differently for VAT purposes.


The FTT conclusion that treating similar supplies of gambling through FOBT differently for VAT purposes to supplies of comparator games (such as casino roulette, electronic roulette, online gaming and over the counter bets on virtual games) breached the principle of fiscal neutrality,  has implications for other taxpayers who operate FOBT and have made claims for overpaid VAT.


It is estimated that the rebate for the bookmaking sector from this case could reach £1billion.  Given the large sums involved, it is anticipated that HMRC will seek to appeal this decision.


A copy of the decision can be viewed here.

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