Back in July it was rumoured that UK online gambling operators may soon have to pay a tax on freeplays and related discounts, despite the fact this ruling was previously removed from the government’s 2017 Finance Bill. However, it would now seem that as the saying goes, there's no smoke without fire, as HM Revenue and Customs announced that it has actually decided to reintroduce the proposed tax on free bets.
Speaking about the breaking news, Jason Fisher, Senior Associate at Wiggin LLP comments: "About three weeks ago the Government issued a Written Ministerial Statement which confirmed the intention to legislate for all measures dropped from the pre-election Finance Bill, including certain provisions which will still commence as originally planned but be given retrospective application if relevant. HMRC has confirmed to the RGA that the freeplay provision is one such provision.”
Although this is would be considered as some pretty substantial news that will have massive repercussions for the bookmaking industry, no one seems to be discussing it.
The HMRC revealed the tax will be enacted on 1 August 2017, under revised legislation. The tax authority added that the tax would raise an extra £45m in its first year, increasing to £110m by 2020/21.
In September 2016, HMRC published a policy paper which called for the introduction of a remote gaming duty as a way of bringing the treatment of remote gaming freeplays and promotions in line with the current general betting duty regime, in which non-online freeplays are currently considered taxable as operator profits under HMRC rules.
The Remote Gaming Duty (RGD) was slated to be included as part of the Finance Act 2017 which was introduced in March 2017, however in April, MPs removed this and a number of parts of legislation included as part of the act, arguing that there was insufficient time to discuss these issues ahead of the UK general election.
Squire Patton Boggs Partner, Carl Rohsler states: “The changes originally proposed in the earlier Finance Bill were shelved and have now been introduced post-election. It is said that they aim to create a more logical treatment of all forms of free bet (whether offered in the course of betting or gaming) which had previously been treated differently.
“The net effect is to increase the overall taxation burden on the gambling community. One major concession which was given as a result of government consultation was that free bets will only be taxed on the first occasion that they are offered, and not when they are “re-bet” during the course of play (as is usually a condition of the bonus offer).
“There has been little reaction from the gambling fraternity, but any change to the taxation structure is likely to put pressure on some operators to limit the use of free betting as a marketing tool. But given the extent to which freebets and bonusing is a necessary part of the ever –continuing struggle to attract and retain players, it seems likely that the larger operators will try to bear most of the burden and continue to offer free bet bonusing.”
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