Bloomberg BNA’s Premier International Tax Library is a comprehensive global tax resource. Trust Bloomberg BNA's Premier International Tax Library for the guidance you need on...
By Ben Stupples
Aug. 11 — The U.K. has published draft legislation on possible tax treatment changes to the country’s online gaming industry that aims to bring them in line with fixed-odds general betting.
Her Majesty’s Revenue and Customs said the new laws would remove the current tax imbalances between the two industries by making online gaming companies pay taxes in the same way as betting companies do on free plays that they offer to customers, according to an Aug. 9 consultation report.
Rebecca Griffiths, a London-based tax associate at international law firm Olswang, said the government is “levelling the playing field” with the gaming and betting industry, and she noted that online gaming companies have previously benefitted in the U.K. from “more generous tax treatment.”
“One consequence might be that operators change what is offered,” said Graham Chase, a tax partner at Olswang. “Instead of free plays, they may offer enhanced terms such as better chances instead. Tax always effects behaviour—sometimes in unexpected ways.”
Online gaming such as internet poker is subject to the U.K.’s remote gambling tax, while fixed-odds betting and pooled bets on horses and dog racing are subject to general betting tax, according to U.K. tax and accounting services firm RKG Consulting.
Free plays, such as free spins in bingo, are omitted in tax calculations for online gaming companies while they are included for betting companies under general betting duty. From August 2017, free plays from online gaming companies will have a taxable value for tax purposes under remote gambling tax, HMRC’s report said.
In line with betting companies, online gaming businesses have been taxed under remote gambling tax at 15 percent of their profits since 2014. The changes were made alongside the U.K. changing laws for the gambling and betting industry so that it was charged on the basis of consumption due to the offshore locations of online gaming companies. As a result, the industry was subject to receipts from U.K. residents regardless of the company’s location, said Olswang’s Griffiths.
The U.K. government’s changes two years ago helped to prompt a trend of consolidation in the online gaming industry. In September 2015, Paddy Power Plc settled the terms of its combination with Betfair Group Plc, agreeing to acquire its competitor for 2.87 billion pounds ($3.2 billion) in a deal that created the biggest publicly listed online gaming company and created an estimated annual pre-tax costs savings of 50 million pounds.
In the same month, GVC Holdings Plc agreed to buy Bwin.party Digital Entertainment Plc for about 1.12 billion pounds. GVC forecast cost savings through the deal of 125 million euros ($139 million) per annum by the end of 2017.
“The fallout from the changes introduced in 2014 has been that many online operators have had their profits affected,” Griffiths said. “Save in respect of pool bets and pooled prize gaming, it’s broadly a case of stakes in less winnings paid out and therefore operators may have duty liabilities even where they do not have an overall financial profit.”
A spokesperson for the U.K. Gambling Commission was unavailable for comment.
To contact the reporter on this story: Ben Stupples in London at email@example.com
To contact the editor responsible for this story: Penny Sukhraj at firstname.lastname@example.org
The consultation document is at http://src.bna.com/hGo.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)