Sportech stand to net over £80m after tax battle

Sportech celebrates 50 years of the Pools Panel. Picture: Contributed
Sportech celebrates 50 years of the Pools Panel. Picture: Contributed
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FOOTBALL pools operator Sportech, which has its roots as an Edinburgh technology firm, is poised to net more than £80 million following a four-year battle with the taxman.

The firm saw its shares soar almost 20 per cent yesterday after an independent tax tribunal ruled it had been unfairly charged VAT on its spot the ball game between 1979 and 1996.

Sportech’s claim, which dates back to March 2009, hinged on its assertion that spot the ball is a game of chance, not a skill-based competition, and therefore should not be subject to VAT.

The First-tier Tribunal’s Tax Chamber agreed with the firm, which will now begin talks with HM Revenue & Customs (HMRC) to agree the final claim value.

Sportech said: “It is anticipated that the sum to be repaid to Sportech will be in excess of £40m of overpaid VAT plus simple interest, which is expected to more than double the total sum receivable to more than £80m.”

Chief executive Ian Penrose said that would be more than enough to wipe out the company’s £57.1m debt pile.

He added: “It’s an enormous sum of money, not far off half our market capitalisation, and would give us a lot of options.”

Penrose told The Scotsman that about 50,000 people a week still play spot the ball, which remains popular across the south of Scotland and northern England and was once a common promotion in many newspapers.

He added: “The majority of them play through a network of collectors or in corner shops, and it’s still a valuable business.”

HMRC has until 30 April to appeal against the tribunal’s ruling, but a spokesman for the tax authority declined to comment on its intentions.

Sportech, which has signed up high-profile “Wags” Danielle Lloyd, Nicola McLean and Bianca Slater to help promote its football pools game, began life as Rodime, an Edinburgh-based technology licensing company that bought the Littlewoods pools and gaming business for £161.8m in 2000.

The firm posted flat pre-tax profits of £15.7m for 2012 on Wednesday, despite a 5 per cent dip in revenues to £112m.

It hopes to start taking online bets on horseracing in the US state of Connecticut in the coming weeks, building on its existing betting shops and telephone operations.

Penrose said earlier this week that the firm, which employs 700 people in North America, expects “some really dramatic growth” in the US over the next three to five years amid the relaxation of gambling laws.

US gambling regulations remain patchy but there are signs of liberalisation. New Jersey last week approved online gaming and said it would continue to fight to legalise sports betting.

Panmure Gordon analyst Simon French said the tribunal ruling was a “life-changing event” for the firm. He added: “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 gaming.”

Shares in Sportech ended the day up 17.25p, or 19 per cent, at 108p, valuing it at £215m.