William Hill and GVC are expected to reclaim up to £350m from HMRC after bookmakers and casinos won a £1bn legal battle over tax paid on fixed-odds betting terminals (FOBTs).
A ruling by the upper tax tribunal last month found that gambling companies had been overcharged VAT on the machines for at least eight years.
In a statement to the stock market, William Hill said HMRC had confirmed it would not be appealing the ruling, clearing the bookmaker to submit a claim for a rebate likely to be worth between £125m and £150m.
“As a result of this announcement, we will now engage with HMRC to agree the support for, quantum and timing of the refund,” it said.
Its shares climbed nearly 6% in early trading as investors digested the prospect of the government having to return funds to the bookmaker.
GVC, the Ladbrokes Coral owner, did not comment on the ruling but has previously said it could benefit to the tune of £200m from a decision in the industry’s favour. Its shares gained nearly 2%.
The refund is the result of a long-running case brought against HMRC by the bookmaker Betfred and the Mecca Bingo owner, Rank, over VAT payments between 2005 and 2013.
Mr Justice Mann and Judge Thomas Scott found that HMRC should not have charged VAT on FOBT takings because the machines were similar to devices such as casino roulette wheels, which are exempt from the sales tax.
Emboldened by the decision, other gambling companies are set to lodge claims for hundreds of millions more, just as government coffers are being stretched by the Covid-19 response.
William Hill said it had submitted claims “substantially similar to those provided in the VAT challenge”. “Whilst William Hill currently expects the net cash recovery to be material, its precise quantum remains uncertain,” the company added. “Nevertheless, the board has considered a number of scenarios which suggest a potential net cash recovery of between £125m and £150m.”
The Guardian has approached Flutter, the owner of Paddy Power, for comment on whether it will also claim a refund.
Securing a tax rebate on FOBTs will provide a welcome fillip for bookmakers, whose business has been hit by the suspension of sporting events during lockdown.
It also means one last windfall from the machines, which were highly lucrative until a public outcry over their links to gambling addiction forced the government to reduce the maximum amount that could be staked on the machines from £100 to £2.
The Guardian has approached HMRC for comment.