In accounts published on August 22, 2013, gaming company Sportech has estimated that the ongoing case with HM Revenue and Customs concerning the value-added tax (VAT) treatment of its “Spot the Ball” game is now estimated to be worth some GBP95m, more than half the company’s market capitalization.
Earlier in March 2013, the UK’s First-tier Tax Tribunal rejected an appeal from HMRC in relation to its earlier ruling in favor of the company.
In December 2010, Sportech challenged the tax authority’s assessment that the game was liable to VAT, having paid VAT on the game’s proceeds between 1979 and 1996. In an appeal heard in October 2012, the FTT agreed with the company’s argument that its Spot the Ball offering is a game of chance, rather than of skill, and therefore should not be subject to UK VAT.
Sportech reportedly paid VAT totaling more than GBP40m during the contested period. After interest, Sportech had estimated in June that the figure could be adjusted to over GBP80m. The company’s accounts now estimates this figure has reached GBP95m.
The company said:
“We were delighted when, in March 2013, our VAT rebate claim, anticipated at approximately GBP95m was determined in our favor by the First-tier Tax Tribunal, although HMRC was subsequently given leave to appeal to the Upper Tribunal. Whilst this is proving a lengthy process, with the claim first lodged in March 2009… we are pleased with our success to date and remain confident in our arguments and a successful outcome of the appeal [hearing on April 29-30, 2014]. In the meantime, we are exploring the options available to secure financial benefit in the event of the positive decision of the FTT being ultimately reversed.”