Sportech boosted by long-awaited £93m VAT repayment

Sportech has finally received a £93m VAT repayment with its long-running case against the UK tax authority dating back to 2010 now drawing to a close.

The operator confirmed the payment this morning and said it is awaiting a further £3m based on the outcome of the HMRC’s appeal, which is yet to be concluded in the Upper Tier of the Tax Tribunal.

The case concerns overpayments in VAT relating to ‘Spot the Ball’ competition run by Sportech subsidiary Littlewoods between 1979 and 1996.

Sportech’s claim was initially rejected in December 2010, however it lodged a formal appeal against the decision and the Tax Chamber of the First Tier Tribunal found in its favour last year.

Since then HMRC has fought to overturn the decision in the Upper Tier but the final determination looks set to be in favour of Sportech.

However if HMRC’s appeal to the Upper Tier is successful, the funds together with any related interest would need to be repaid by Sportech. The final determination is due within the next two or three months.

In March the High Court ruled the VAT overpayment refund should be subject to ‘compound’ rather than ‘simple’ interest, substantially increasing the amount Sportech is due.

Today’s £93m repayment is purely based on ‘simple’ interest and Sportech said it did not know if any alteration to the treatment of the interest would occur.

Sportech’s share price climbed 4p to 92p following the news, and Peel Hunt analyst Nick Batram said the VAT claim could ultimately be worth 35p a share.