The leisure group Rank has confirmed that it has entered into an arrangement with a third party to cap some of its contingent tax liabilities. The gaming giant, that operates more than 135 sites including the Mecca Bingo clubs, and Grosvenor and G Casino sites said the agreement relates to a VAT refund from HMRC.

Rank was refunded £59.1m by HMRC in 2008 after a numerous court appearances. Rank had claimed that VAT should not be payable on interval bingo games. HMRC have appealed the decisions made by the VAT Tribunal and High Court. The European Court of Justice is expected to make a final decision in the matter in 2012.

Rank has stated that it will be making a £4.5m payment this year to fund the agreement. If the European Court of Justice rules in favour of HMRC, then the net liability of Rank will be just £25.6m plus interest as a result of the agreement. Without the agreement the gaming company would be liable for £66.1m plus interest if it were to lose its final court battle.

In essence the company is insuring £40.5m for £4.5m. It should be noted that the agreement does not cover the VAT refunds on main stage bingo games and amusement machines which amount to a further £42.5m plus interest.