Gambling tax Budget news

Stephen Hignett, Tax Partner, CMS

Remote Gaming Duty and freeplays

When the point of consumption gambling duty rules were being designed in 2014, many bookmakers complained that free and discounted bets should not be subjected to general betting duty, particularly since the equivalent gaming incentives – “free plays” or “free spins” – were not subject to remote gaming duty. The Government’s response at the time was that they would retain the status quo as they were seeking only to change those elements of the rules that would move the relevant gambling duties onto a “point of consumption” footing; i.e. so as to change the regime, as it was then, from a “place of supply” basis.

The bad news from the Budget is that the Government has indicated that it will now subject free gaming to remote gaming duty, so that the remote gaming duty treatment falls in line with free bets being subject to general betting duty. Whilst it’s not yet clear, one assumes that this will result in both free spins and bonus credits becoming subject to remote gaming duty. This is clearly a big blow for UK-facing remote gaming operators as bonus credits and free spins are very widely used by operators and are critical to player acquisition and retention.

Slightly better news is that the new rules will not come into effect until 1 August 2017. This gives operators 17 months to consider how their player incentives need to change before the new rules come into effect so as to ensure that the additional duty cost is factored in and, where possible, the range of incentives offered include those at the more duty-efficient end of the spectrum. The duty efficiency of different incentives will, however, turn on how the new rules are drafted.

VAT on advertising and marketing

In last Summer’s Budget, it was announced that the Government was considering extending the “use and enjoyment” VAT place of supply rules to “business to business” supplies of advertising. Whilst primarily aimed at perceived VAT avoidance in the insurance sector (following the Ocean Finance case) there were concerns that, were such rules to apply to apply across the board – including, to the remote gambling industry – this could resulting in a significant irrecoverable VAT cost.

Simple example: UK-facing online gambling operator is based in Gibraltar or Alderney (i.e. outside the EU VAT zone). Business to business supplies made to that operator (whether by third parties or group companies in other jurisdictions) are currently treated as “supplied where received” (i.e. outside the EU VAT zone) resulting in no VAT being charged. This includes supplies of advertising services made to the operator (including TV ads, online adds, etc.) by a UK provider which are, therefore, currently VAT free. Were such supplies to suffer UK VAT, this input VAT would generally be irrecoverable by – and so an absolute cost for – the operator; since the corresponding output supplies made by the operator, of gambling services, are exempt from VAT (resulting in no input VAT recovery).

Were the rules to change such that advertising which is “used and enjoyed” in the UK resulted in the operator having to be charged, or otherwise having to account, for UK VAT on such supplies, that VAT would become an absolute cost to the operator, making the equivalent advertising services 20% more expensive than previously.

Since last Summer’s Budget, no consultation on this subject has yet been published. The press releases from the Budget don’t mention these proposed changes at all.

Is no news, good news on this occasion?

Horserace Betting Levy Reform

The Budget notes confirm the recent reports that the Levy will be replaced by April 2017 and that the replacement will give British horseracing the right to funds from offshore remote betting operators.

Gaming duty

Gaming duty is payable by “bricks and mortar” casinos. As is the norm in each Spring Budget, the bands in which the different rates of duty apply will be increased in line with RPI for accounting periods starting on or after 1 April 2016 (see final table below).

Gambling Duty rates for 15/16 and 16/17

Gambling duties
  Tax year 2015-16 Tax year 2016-17
Bingo duty
Percentage of bingo promotion profits 10% 10%
General betting duty
Percentage of ‘bookmaker’s profits’ for fixed odds bets and totalisator bets on horse or dog races 15% 15%
Percentage of ‘bookmaker’s profits’ for financial spread bets 3% 3%
Percentage of ‘bookmaker’s profits’ for all other spread bets 10% 10%
Pool betting duty
Percentage of ‘bookmaker’s profits’ 15% 15%
Lottery duty
Percentage of the price paid or payable on taking a ticket or chance in a lottery 12% 12%
Remote gaming duty
Percentage of gaming provider’s profits 15% 15%
Machine games duty
Percentage of net takings from dutiable machine games with a maximum cost to play of not more than 20p and a maximum cash prize of not more than £10 (Type 1 machines) 5% 5%
Percentage of net takings from machines which are not Type 1 machines but where the cost to play cannot exceed £5 20% 20%
Percentage of net takings from dutiable machine games where the maximum cost to play can exceed £51 25% 25%

1                      MGD new higher rate effective from 1 March 2015.

Gaming duty 2015-16: rates and bands
Tax rate 15% 20% 30% 40% 50%
Gross gaming yield £2,347,500 £1,618,000 £2,833,500 £5,981,000 Remainder
New figures for accounting periods beginning on or after 1 April 2016
Tax rate 15% 20% 30% 40% 50%
Gross gaming yield £2,370,500 £1,634,000 £2,861,500 £6,040,000 Remainder


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