Licensees have been advised to set aside their VAT rebates on amusement with prizes (AWP) machines, writes Michelle Perrett. Hundreds of licensees and many pubcos have been receiving tax rebates from HM Revenue & Customs (HMRC), following a court ruling in 2009. However, a European Court of Justice case, scheduled for 30 June, could set a precedent allowing HMRC to appeal the refunds. In September 2009, a judge ruled that casino operator Rank should receive £26m it had overpaid in VAT on gaming machines between 2002 and 2005. VAT had been charged on some machines — including category C AWP machines used in pubs — and not others, which broke EU competition law. This left the door open for pubcos and licensees to claim their overpaid tax from HMRC. Legal expert Peter Coulson has warned both licensees and pubcos to keep the money safe in an Escrow account (a bank account that allows funds to be held independently) until the ruling is definitive. “HMRC is pursuing this with some rigour. “This could be a long-running saga. A ruling against the trade could be a major problem for the industry,” said Coulson. A number of pubco agreements split the income of AWP machines 50:50 between the pubco and tenant — meaning any VAT refunds would be split down the middle. In cases where the full refund has been sent to the licensee, HMRC has confirmed it will pursue the individual licensee for the full amount and not the pubco for their 50%. Coulson added: “Before licensees hand over any money they should ensure they have received a guarantee from their pubco in writing. This must guarantee that they will pay back the rebate to the licensee. "The problem is that if the publican hands back the money with no written guarantee they may have no legal way of claiming it back from the pubco.” Punch, which claimed on behalf of its tenants, has been invoicing them for its 50% share. It has already legally guaranteed in writing it will refund the monies if the case is eventually overturned. However, Punch licensee Michael Adams of the Cock Tavern in Walthamstow, London, said he is concerned about paying the money back despite the assurance. “I would rather put the whole lot into an account or pay back the lot to HMRC. I think that if I am fully responsible for the money I am entitled to keep this money safe for my business.” A spokesman for Punch added: “We are aware HMRC is processing repayments for circa 500 of our partners. Of these, over 420 have now received payments, with the majority of those contacted having already returned Punch’s share of the claim.” Enterprise Inns has claimed separately for its 50% in over-paid VAT and has £5m sitting in an Escrow account. It is also claiming the remaining 50% VAT rebate for 553 of its pubs.