Betfred filed a case against the HM Revenue & Customs (HMRC) alleging that the company was overcharged on Fixed Odds Betting Terminals (FOBTs) from 2005 and 2013.

Betfred argued that the HMRC imposed unreasonable taxes on FOBTs but refrained from imposing similar taxes on land based casinos and online casinos who offered roulette style games which were similar to FOBT games. A UK tax tribunal reviewed the petition from Betfred and found that the HMRC had not acted fairly and breached fiscal neutrality.

UK bookmakers have reportedly paid the HMRC over £8 billion in taxes on FOBT revenue from 2005 to 2013. Now that the tax tribunal has ruled in favour of Betfred, a tax rebate of over £1 billion will have to be paid back to UK bookmakers.

Betfred is expected to receive a rebate of close to £100 million should the HMRC decide not to appeal the ruling or if it appeals the ruling but does not get the decision overturned.

Now bookmakers are in line for a £1bn tax rebate after the court ruled they were wrongly charged VAT on revenue from controversial fixed-odds betting terminals (FOBTs).

The tribunal ruled that collecting VAT on FOBTs between 2005 and 2013 had “breached the principle of fiscal neutrality” because similar roulette-style games played in casinos and online were exempt from the tax.

A spokesperson for HMRC declined to say whether it would appeal against the verdict, but said: “This is an important judgment and HMRC is giving it careful consideration.”

If HMRC does not seek to overturn the ruling, or is unsuccessful in its appeal, the rebate for the whole of the bookmaking sector is expected to be at least £1bn. Industry sources said Betfred alone was likely to reclaim £100m.

The industry-wide figure is based on the rate of VAT paid on combined income from FOBTs between 2005 and 2013, which amounts to more than £8bn plus interest.