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UK ‘Point of Consumption’ Online Gambling Tax Receives Final Approval

Ongoing changes to the United Kingdom’s gambling codes that include the creation of a 15% “point of consumption” tax for all online gambling action involving UK citizens will take effect on December 1st, 2014, after changes already approved for the UK Gambling Commission’s License Conditions and Codes of Practice (LCCP) received royal assent, the final step before being enacted.

ukflagThe 15% tax is designed to target the dozens of one-time British gambling firms who have relocated their operations to Gibraltar over the last decade, taking advantage of the protectorate’s tax-shelter status.  The former UK gambling firms, most of which still trade on the London stock markets, have sought to move as much as possible of their UK-generated gambling action through their online sites, thus avoiding a similar revenue tax charged on all action placed through the UK’s land-based betting shops.

All operators offering gambling services to UK citizens, whether live or online, will also be required to be licensed by the UKGC, which issued a brief update on the approved modifications, as follows:

The Gambling (Licensing and Advertising) Bill has now received Royal Assent. The Act amends the 2005 Gambling Act to provide greater protection measures for users in Great Britain of remote gambling services, including online bingo, casino and betting websites and telephone betting.

It will mean that remote gambling by consumers in Britain is regulated on a point of consumption basis and all operators selling into the British market, whether based here or abroad, will now be required to hold a Gambling Commission licence to enable them to transact with British consumers.

In addition, for the first time, overseas based operators will be required to inform the Gambling Commission about suspicious betting patterns, to help fight illegal activity and corruption in sports betting. Overseas based operators will also be required to pay and to contribute to research, education and treatment in relation to British problem gambling and regulatory costs.

Minister for Sport Helen Grant said, “This Act marks a significant step in increasing protection to consumers based in Great Britain, by ensuring that all remote gambling operators will be subject to robust and consistent regulation. This includes a requirement for operators to support action against illegal activity and corruption in sport, and to comply with licence conditions that protect children and vulnerable adults.”

Chairman of the Gambling Commission, Philip Graf said, “This is a welcome step forward – bringing the 85% of the remote gambling market currently regulated overseas within the Commission’s remit will provide us with direct access to and oversight of all commercial gambling provided to those in Britain. This means that we will be far better placed to protect players and to respond to and advise the government on emerging player protection and consumer risks and issues.”

The Government’s intention to extend the horserace betting levy to overseas bookmakers was also announced during the passage of the Gambling (Licensing and Advertising) Bill through Parliament. The change will create a level playing field between on and offshore operators so that all will contribute to maintaining the quality of the horseracing and also fund integrity, veterinary and breeding activities. The Government intends to publish a public consultation on proposed changes to the levy extension shortly.

The statement directly addresses the complaint most often brought by the former UK firms and by Gibraltar officials, that forcing the firms to pay the point-of-consumption tax could force a lot of the action onto unregulated, offshore sites, though none of the Gibraltar firms have openly stated any intent to be noncompliant with the online tax.

Nonetheless, Gibraltar officials have openly battled with the UK over the issue, since the new codes will exempt action being conducted with gamblers in other countries.  The net effect of the new law is to remove the incentive that existed for the former British firms to relocate to Gibraltar, while still reaping tens of millions in profits from UK punters.

This piece in the Gibraltar Chronicle displays the protectorate’s stance on the remote gaming tax, protesting that the move will undermine Gibraltar’s “strict regulatory standards” which depend on a “home state, host state approach.”  Exactly why one necessitates the other isn’t quite clear, just as the same piece attempts to downplay the tax consideration, the proverbial 800-pound gorilla in the room.

As Chief Secretary to the Treasury Danny Alexander told the Gibraltar outlet, “The taxation is not the aspect that we consider to be most problematic.”  Nonetheless, the December enactment of the tax changes means that dozens of online-gambling firms will no longer be in a position to openly freeroll the UK market.


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