Details of remote gaming duty charge on “freeplays”

Stephen Hignett, Tax Partner, CMS

As expected, HMRC has published its response to the consultation on the remote gaming duty (“RGD”) treatment of “freeplays”.  You can find it here.  It has also published draft legislation (as part of the draft Finance Bill 2017) imposing the new RGD charge on freeplays, which has been amended as a result of the consultation (the original consultation had included draft legislation).  You can find the draft Finance Bill here (see section 48, which amends the relevant provisions of Finance Act 2014).

The key paragraph in the HMRC response is as follows (my emphasis):

The government has carefully considered the evidence provided by respondents on the issue of freeplays in re-wagering arrangements. The government accepts that taxing all freeplays in remote gaming will impose greater burdens than expected. As a result, the government has decided that it can still achieve its objective of aligning freeplays in remote gaming with those in general betting by taxing the first use of freeplays only. In line with the consultation suggestion, winnings will also only be brought into the duty calculation at the end of the re-wagering process. This means the additional burdens on businesses are reduced and are proportionate. Revised draft legislation has been produced to reflect this change. Changes will also be made to ensure that games that are free to play for all participants will not be subject to any charge to RGD. Any prizes from these free to play games will also be excluded from the duty calculation.”

The possibility of re-wagering resulting in multiple charges to RGD was the number one issue raised by respondents.  Had HMRC not sought to resolve this issue, the treatment of freeplays (for RGD) and free bets (for general betting duty) would not have been aligned (being HMRC’s stated aim from the outset).  Consequently, it’s not a big surprise that HMRC has agreed to make this change; although, that will not diminish the sense of relief for the industry. 

What is interesting, however, is the “solution” that HMRC has adopted.  Rather than allowing operators to deduct amounts won at each stage of the re-wagering process (which would have required an RGD computation for every play during the re-wagering cycle), they have chosen to keep things simple by charging only the first use of a freeplay and permitting a deduction for winnings only at the end of the re-wagering process (with the interim transactions being ignored).  One reason that HMRC has given for adopting this approach is to counter arguments that the 1 August 2017 commencement date is too soon, given the process and commercial issues that this change in law will raise for operators.  The suggestion is that, since they have adopted the simplest solution, 1 April 2017 should be manageable.

The response to the consultation has made it clear that the existing legislation is capable of being interpreted in different ways with different operators taking different approaches.  Exactly how the new freeplay rules will be interpreted will be very interesting. 



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