Sportech wins long-standing VAT claim

A tax tribunal has found in favour of Sportech in its VAT claim against Her Majesty’s Revenue and Customs (HMRC) worth more than £40m plus interest, the operator has revealed this morning.

Following the ruling by the Tax Chamber of the First Tier Tribunal, Sportech could potentially receive around £80m once discussions with HMRC are concluded, however the British customs and tax department remains eligible to appeal the decision until 30 April and has as yet shown no indication as to whether or not it will make such an appeal.

The claim relates to the ‘Spot the Ball’ competition run by Sportech subsidiary Littlewoods, over which the operator submitted a £40m claim for the repayment of overpaid VAT relating to activities between 1979 and 1996.

This claim was initially rejected in December 2010, however Sportech lodged a formal appeal against the decision and the Tax Chamber has now found in its favour.

The successful appeal follows Sportech’s announcement that 2012 was a “difficult period” for its egaming arm, with challenges faced over migrating various products to Playtech software.

Its Vernons brand launched online casino and poker offerings with Playtech in December 2011, while its bingo offering and all products previously covered by the Littlewoods brand also made the move over.

Analyst Nick Batram issued a ‘Buy’ recommendation this morning, describing the tax decision as “A huge development for Sportech,” and adding “Management is making good strategic progress with the business, but the VAT monies could accelerate this further.”

Simon French, analyst with Panmure Gordon, also issued a ‘Buy’ recommendation after what he described as “A life changing event” for the operator.

“It gives Sportech the funds to fully capitalise on its market leading position in the US, just as certain states within that country are taking a more permissive approach to online gambling,” added French.