Britain’s tax collector has made a minor, albeit important change to remote games duty, specifically for the area of free-play bets, that ensures the UK’s igaming sector retains its internationally competitive position.
[dropcap]G[/dropcap]aming operators breathed a sigh of relief early December when the UK tax collector conceded to revising its approach to free-play, free bets and discounted betting – a welcome correction that should maintain the UK’s case for providing an open and competitive market for online gambling.
The dispute comes off the back of a decision made by the former UK chancellor George Osborne, who announced in March that as of August 2017 online casino and bingo operators would no longer be exempt from tax on bets which they had discounted or offered for free in promotional packages.
This would mean that even on bets for which customers themselves had not placed or paid any money, operators would be liable to account for the duty on such bets.
Coming alongside the imposition of a 15 percent point of consumption tax, and a raising of machine games duty for bookmakers from 20 to 25 percent, operators were understandably resistant to the move. A public consultation ensued with key stakeholders, which received responses from the Remote Gambling Association (RGA), ten online operators and three tax experts.
The main issue under scope was whether the change would have the HMRC’s intended policy effect or would simply incentivise unintended behaviour or produce different outcomes. Specifically HMRC and the respondents focused on the issue of free-play offers that include “re-wagering requirements” – where players are required to carry on playing until a predetermined value or some multiple of the offer before they can claim their winnings.
This means the additional burdens on businesses are reduced and are proportionate.
In the current form of the legislation, free-play bets with re-wagering requirements would still be subject to tax on the initial bet, although as winnings are accumulated thereafter, operators would not be allowed to deduct these from their tax calculations until the player meets the rollover requirements and withdraws the winnings.
Essentially operators claimed that taxing all free-plays in the same way would impose an “unacceptably high tax burden that could severely damage the market,” not only making business unfeasible for existing operators but raising competition issues, as new companies would struggle to get a foothold.
In the end the HMRC conceded to simplifying the scheme so that it taxes only the first use of free-plays, and that winnings will “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,” said the tax man. “Revised draft legislation has been produced to reflect this change.”
HMRC also stated that games that are free to play “for all participants” will not be subject to any change to remote games duty, and “any prizes from these free to play games will also be excluded from the duty calculation.”