Rank Bingo - Tax Refund Claim Is Accepted by Tribunal

By: Louisa Nesbitt
Original Article here



May 22 (Bloomberg) -- Rank Group Plc, the second-largest U.K. bingo-club owner, said a tribunal accepted its claim for a 36.3 million-pound ($72 million) tax refund after finding that some types of gambling were unfairly taxed.

The U.K. tribunal said a value-added tax on some forms of so-called interval bingo violated European Union law, the company said today in a Regulatory News Service statement. The government has until July 10 to appeal.

Such taxes are among the burdens that Rank and other bingo companies say is weighing on the industry, whose sales have sagged since England banned indoor smoking in public places in July. Bingo operators have sought the removal of VAT on game revenue, a levy not imposed on other gambling. The government most recently rejected their position in March.

The potential refund ``does not change the fundamentals,'' analyst Mark Reed at Landsbanki in London said in a research note. Landsbanki will keep its ``reduce'' rating on the stock, ``given our concerns about the weakening UK consumer and its likely ongoing impact on Rank's business,'' Reed said.

The VAT and Duties Tribunal's ruling probably will have no ``material benefit'' this year if it's appealed by the government, the company said. Interval bingo is played during periods between sessions of clubs' main bingo games.

Rank rose 1.75 pence, or 2 percent, to 90 pence at 11:33 a.m. in London trading. The stock is little changed in 2008 after losing about 70 percent of its value in the prior two years.

Smoking Ban

``HMRC are considering the implications of the decision, but it is likely we will seek leave to appeal,'' Her Majesty's Revenue and Customs spokesman Jan Marszewski said in an e-mailed statement.

Unlike other forms of gaming in the U.K., bingo revenue is subject to VAT as well as so-called gross profits tax. The Bingo Association wrote to Chancellor of the Exchequer Alistair Darling in January to advocate lifting VAT on bingo. He maintained the duty in the budget.

``There is a risk that this legal victory may negate government's enthusiasm for any further help,'' Landsbanki's Reed said.

The tax system is impeding industry efforts to respond to the smoking ban, according to the association, which said in March that 43 bingo clubs had closed across the country in 14 months. Club owners also face higher electricity bills, increased payroll and competition from online rivals such as 888 Holdings Plc, whose bingo Web site went live in February.

To contact the reporter on this story: Louisa Nesbitt in Dublin at lnesbitt@bloomberg.net.