UK Makes Big Changes to Online Gambling Taxes

British Chancellor of the Exchequer George Osborne announced the biggest changes to gambling legislation since the reforms of seven years ago, telling online operators that betting would now be taxed according to whether wagers are made in the UK or offshore.

What are the changes? How will they affect players?

Point of Consumption Tax

Osborne said to new “point of consumption” tax regime, to be implemented in December 2014, would create a more level playing field. He added that the current situation in which 90% of online gambling is supplied from outside the UK “is clearly not fair – and not a sensible way to support jobs in Britain.”

Treasury documents estimate that if the new tax is levied at the existing rate of 15% of gross profits, the impact of this would be that the Exchequer earns extra revenues of £55m in 2014-15m, £240m in 2015-16 and £270m in 2016-17. The new tax would be similar to those already instituted by other European countries toward gambling operators.

The Labour Government’s 2005 Gambling Act taxed remote gambling operators according to place of supply and not place of consumption. As a result, most large UK gambling companies, including Ladbrokes and William Hill, moved their remote gambling servers to offshore locations such as Gibraltar.

Companies React

William Hill CEO Ralph Topping summed up the feelings of the larger online gambling operators, saying that his company remained confident about its future on the Internet, but that smaller companies should begin to worry about the impact the legislation will have on them in 2015 and beyond.

Mobile gambling operator Probability’s CEO Charles Cohen made similar remarks, saying that it would be great for the big boys but a disaster for everybody else. “It will cultivate a big black market,” he said, referring to expectation that it will be difficult for smaller business to compete with their larger competitors through the usual legal channels.

Current State of Play

Online casino and sportsbook operator bet365 is now the largest company of its type left in the United Kingdom, after a massive year in 2011 which saw the firm increase its year-on-year revenues by a staggering 22% to £501 million. It was boosted mainly by its live in-play sports betting option, which rose by 58% last year.

William Hill and Ladbrokes both shifted their online operators to Gibraltar last year because of the higher taxes they would have had to pay if they remained in the British headquarters. Although bet365 maintains its operations base in Stoke, it also has some operations in Gibraltar to support its online casino, bingo and poker websites.