Rank receives 59.1m [pounds sterling] VAT repayment

Leisure Report, Dec, 2008

The Rank Group has received 59.1m [pounds sterling] in overpaid VAT from Her Majesty's Revenue and Customs (HMRC).

The repayment covers the five-and-a-half year period from January 2003 to June 2008. Rank said it anticipated that the net cash benefit will be partially offset by gross profits tax and other related costs.

The repayment relates to a VAT and Duties Tribunal ruling in May 2008, which HMRC has appealed. The appeal will be heard by the High Court in the first half of 2009. If HMRC is successful in its appear, Rank may be required to return the payment with interest. The case concerns the application of VAT on games of interval bingo in Rank's Mecca Bingo clubs. It is Rank's contention that this practice contravenes European Union principles on fiscal neutrality. Rank has taken issue with the fact that some of these games are taxable for VAT and some are not, depending on the value of the payouts. It argues that all the games are essentially the same and under EU rules should all be taxed similarly.

As a consequence of the Tribunal's ruling, Mecca Bingo has not paid VAT on any games of interval bingo since July 2008. At present, it is not Rank's intention to recognise the revenue or operating profit benefits of the repayment (or of the decision to stop paying VAT on interval bingo) in the group's financial results for 2008.

The repayment will be used to reduce net debt, and will have no impact on the size of Rank's existing banking facilities which will remain committed until 2012.

Shares in Rank rose 2p, or 3% following the news, but some analysts have contended that the victory could be worth a larger rally for Rank once the markets recover from the current malaise.