The UK government has confirmed its intention to tax UK online gambling operators at 15% of gross profits from 1 December 2014.
Online operators now have until 30 September to comment on the draft reforms to remote gambling taxation set for inclusion in the 2014 Finance Bill, with the government planning to implement these on 1 December 2014. The revised igaming tax regime based on location of consumer, rather than company, will extend to Northern Ireland, even though the Gambling Act 2005 does not apply there.
The companion Gambling (licensing and advertising) Bill, requiring “all operators selling or advertising into the British market, whether from here or abroad” to hold a UK Gambling Commission licence, is already before Parliament, awaiting its second reading.
Introducing the tax reforms today, Secretary to the Treasury Sajid Javid said it was “unacceptable that gambling companies can avoid taxes by moving offshore”, and that the government was taking “decisive action” to stop this. HM Treasury, on behalf of the government, also said in its statement that taxing all operators on their profits generated from UK customers would “create a level playing field” among these companies.
The government said it anticipated the new point-of-consumption (POC) regime would raise an extra £300m a year in tax revenue, based on H2 Gambling Capital estimates the UK igaming market was worth £2bn in GGR terms in 2012 when the contribution of online businesses based offshore in igaming hubs such as Gibraltar was included.
UK regulator the Gambling Commission recently revealed that online gambling operators taxed and regulated in the UK generated GGR of £795.5m last year - less than 40% of H2′s £2bn figure for the UK as a whole.
HM Treasury also published the first draft of the tax legislation today, as an annex to its summary of responses to the consultation on the design of the tax which it ran from April to June last year which received 40 responses.
Several igaming industry stakeholders also met face-to-face with Treasury officials, including 888, Bet365, bwin.party, Paddy Power, Rank, William Hill, Victor Chandler, lobby group the Remote Gambling Association and Gibraltar lawyers Hassan’s, representing the Gibraltar Betting and Gaming Association, which has threatened legal action if the UK proceeded with plans to tax igaming at the point of consumption.
The consultation identified two areas of “particular concern” to respondents the government said today - the definition of a UK customer and the right enforcement mechanisms - for which it believes it has now “settled on the right approach”.
In addition to outlining measures it said amounted to a “strong and robust enforcement regime” for the tax, the government said the definition of a UK customer under the new law will be based on where they usually live, meaning that player will be liable for tax treatment even when they log in and play from abroad. The alternative, a requirement for operators “to take reasonable steps” to determine their location, using methods including customer self-verification, geo location and the registered payment address, was less popular among respondents.
Article written by Stephen Carter
