UK Budget Special Report - E-gaming loophole closed

Published: 03 May, 2012

The new tax on online gambling, which will apply to any transaction with a UK punter regardless of where the operator is located, will reduce the temptation to move offshore that has already led most of the big players to leave Britain.

However, whether it will actually encourage them to return is another question, and that is unlikely to have been much of a motive for the government, which is more interested in plugging the revenue gap. There are also fears it could lead to a grey market of illicit offshore operators.

Explained Alison Sprague, a director and economist at FTI Consulting: “As is stood, the Gambling Act 2005 enabled companies from all over the world to market to the UK without a UK gambling licence as long as their equipment was located in a whitelist of jurisdictions, currently Alderney, the Isle of Man, Tasmania, and Antigua, or the European Economic Area.

“In short, operators found that they could pay less, and typically no, tax if they located their equipment in tax-efficient whitelisted jurisdictions, while maintaining a presence in the UK, typically their marketing team.”

But implementing the new regime may not be easy. Gareth Martyn, indirect tax director in PwC’s betting and gaming team, commented: “The government faces a number of challenges ahead of the introduction of the duty to ensure that it can be effectively administered. A similar form of duty is already in place in some mainland Europe states, but it is interesting to note that the introduction of a similar regime in Ireland has been delayed for over a year.”

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