Rank Group, the operator of Mecca Bingo clubs and Grosvenor casinos, is in line for a £36 million VAT rebate after winning a legal dispute with the tax authorities.

The decision could spark other bingo operators to lodge claims, with analysts speculating on a total liability to the Government of more than £100 million.

Times Online understands that Gala Bingo, the country's biggest operator with 160 clubs, has already lodged its own claim directly with HM Revenue & Customs (HMRC).

Rank persuaded the VAT and Duties Tribunal that HMRC's practice of charging VAT on interval bingo games was against European law.

The ruling concerns the games played during intervals between sessions of a main bingo game. This type of game is also known as mechanised cash bingo, or cashline, and has various forms.

Rank successfully argued that the Revenue’s practice of charging VAT on some versions of interval bingo but not others was in breach of the European principle of fiscal neutrality. This requires tax authorities to adopt a consistent VAT approach to services of the same or similar nature.

Tony McClenaghan, head of indirect tax at Deloitte, the professional services firm, which advised Rank, said the case would benefit other bingo operators, with analysts estimating it could provide a boost of at least £100 million to the industry.

HMRC has until July 10 to appeal against the ruling. It had no immediate comment on the decision but is widely expected to appeal.

Rank said in a statement that should the Revenue decide to appeal, it was unlikely there would be any material benefit to the group this year.

The tribunal decision relates to Rank's claim for the years 2005 to 2005, and a source close to the company said that, depending on any appeal, it could launch a claim for other periods.

The ruling is a welcome relief to an industry attempting to cope with the impact of the smoking ban and the scrapping of high-jackpot machines in last year's Gambling Act.

Operators suffered a further blow recently when the Treasury ruled out the removal of the anomaly whereby clubs are liable to pay both VAT and a gross profits tax, whereas most others forms of gambling are exempt from VAT.

However, Gerry Sutcliffe, the Culture minister responsible for gambling, has hinted at moves to help the beleaguered bingo sector by relaxing rules that restrict £500 jackpot machines.

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