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NEWS 10 July 2018

Brexit uncertainty is not disturbing the gambling industry

By Nicole Gheller

Theresa May’s government was teetering precariously after the sensational resignations of two top of Britain’s Cabinet ministers, Foreign Secretary Boris Johnson and Brexit Secretary David Davis.

Johnson’s departure threatened to rip apart the Conservative coalition government who are deeply divided over how Britain should exit from the European Union in March 2019.

Davis, who has been the lead negotiator with the EU, quit on Sunday, followed by Steven Baker, a Junior Minister in the Department for Exiting the European Union. Johnson, considered a contender to replace the Prime Minister, was the third minister to resign in less than 24 hours.

Tony Coles, a consultant with Gordon Dadds law firm specialising in gaming and betting law, Monday’s Cabinet resignations would have no impact for the UK gambling sector.

The resignations will have “absolutely no impact at all”, Coles said, noting that gambling is not an EU-regulated activity. “It won’t make a difference.”

According to Harris Hagen consultant, Hilary Stewart-Jones, the resignations are ‘irrelevant’ to the industry.

But Brexit uncertainty has stoked some fear. Last week, Gibraltar increased its license fees and lowered gross revenue taxes for gambling companies in an attempt to hold onto operators in the event of a bitter Brexit breakup with the EU.

“It is undeniable that the Gibraltar based remote gambling industry remains the most significant in Europe, if not the world, but it is now sailing into headwinds,” Minister for Financial Services and Gaming, Albert Isola, said. “These are created by the uncertainties of Brexit and challenges abound the EU market access.”

Joerg Hofmann, a senior partner at Melchers law firm in Heidelberg, Germany, told Gambling Insider that he sees no advantage for the gambling industry once the UK leaves the EU in March 2019.

“Employees in the gaming industry are restricted because they may no longer be able to refer to the freedom of establishment and the freedom to provide services across borders,” Hofmann said. “Employees in England will have to worry about their professional future, depending on their legal status and the results of the Brexit negotiations.”

“Developments in gambling regulation in the UK will – probably – no longer have to be measured directly against the yardstick of the EU principle of non-discrimination.”

Mr Hofmann said that post-Brexit, there may be regulatory implications that restrict UK-based operators, noting that “the UK will leave the area of competence of the EU supervisory authorities”.

“In addition, the development of gambling regulation within the European Union will in future - at least not directly - be shaped by one of its most important and experienced gambling supervisory authorities to date. It remains to be hoped that the exchange with the Gambling Commission will also take place post-Brexit.”

Another issue in question is tax. According to Gavin West, director at Ampla Consulting, gaming taxes will not be affected by Brexit as they are governed by national legislation and ‘not subject to any EU directives’.

Currently EU businesses are able to simplify VAT reporting requirements through MOSS (Mini One Stop Shop). With MOSS, operators can avoid registering for VAT in each EU State where they operate. “It allows online operators to report all activities on a Member State by Member State basis on a single quarterly return and to make a single payment of VAT for all supplies to the tax authorities in the Member state in which it is registered,” West said in an article.

Once Brexit happens, the issue facing companies is the fact that some operators are registered for MOSS in the UK. The MOSS scheme extends to operators from outside of the EU but the criteria and rules differ. Starting in March 2019, UK operators will be moved from the Union Scheme to a non-Union Scheme which will then require operators to register for VAT where they do not have an establishment.

“If an operator does have an establishment in an EU Member State then any decision process is taken away from it and it would be required to register for VAT and the MOSS there. Where no establishment exists the operator would be able to choose in which Member State it wishes to register in. This however could also create issues as in certain countries non-established taxable persons may be required to use local agents,” West added.

The resignations were followed by the appointment of Jeremy Hunt as the new Foreign Secretary and Dominic Raab as the new Brexit Secretary.

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