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UK Gambling Reform Plans - protection for proble gamblers or for the HMRC?

The Government recently announced that all operators selling into the British market, whether from within Great Britain or abroad will, in future, be required to obtain a licence from the Gambling Commission to enable them to continue to target and transact with British consumers.

September 2011

The amendments to the Gambling Act 2005 will change the focus from the point of supply to the point of consumption, although no details have yet been given as to which jurisdictions will be affected or the date on which the amendments will be implemented.

The changes to the regime are being made in order to remove what John Penrose, the minister responsible for gambling policy and regulation, described as the unfair advantage overseas companies have over GB-licensed gambling operators. They currently benefit from access to the market in Great Britain without bearing a fair share of the costs of regulation, research, education and treatment of problem gambling. In his statement, Penrose said:

"These proposals are an important measure to help address concerns about problem gambling and to bridge a regulatory gap, by ensuring that British consumers will enjoy consistent standards of protection, sports bettingno matter which online gambling site they visit. For example, previous work by the Gambling Commission has highlighted deficiencies in some remote operators' arrangements for preventing underage play, and, for the first time, overseas operators will be required to inform the UK regulator about suspicious betting patterns to help fight illegal activity and corruption in sports betting".

Currently, any gambling operator which offers its services in Great Britain must be regulated/licensed either in an EEA member state or one of the states approved by the Department of Culture, Media and Sport on the so-called ‘white-list’ which includes, Alderney, Isle of Man, Tasmania and Antigua.

The white-list is to be phased out but in order to minimise disruption to existing operators. The Government intends to put in place a transition period which will entitle operators who currently hold a licence in EEA member states and the existing white-listed jurisdictions, to continue trading under an automatic transitional licence.

Crucially, the changes are likely to remove the tax benefit of being registered in a low-taxation jurisdiction. While the taxation implications are uncertain pending the response of the Treasury to the changes proposed by Penrose, the new licence system could result in all companies benefiting from a British gambling licence paying the same level of tax on UK gross profits no matter which jurisdiction they are registered in. Whether this is a fortunate by-product of the Government’s wish to address problem gambling or the driving force behind the changes does not need further speculation.

tax calculatorOf course, it is the taxation element of the changes to the British gambling regime which are likely to be of greatest concern to those operating or considering operating in the British market. The larger companies which operate legally are used to a high level of regulation and are unlikely to be phased by new regulatory requirements. They have been assured by Penrose that they will not be required to duplicate regulatory requirements and that companies located in currently white-listed jurisdictions will be treated with a "lighter touch". For those located off-shore (by now, the vast majority), it is the likely significant hike in their tax liability which is the greatest cause for concern and some companies are suggesting it is the British consumer who will suffer as a result through increased charges. On the other hand, companies which were forced to follow competitors offshore in order to stay competitive will no longer be at a disadvantage if they choose to be based in the Great Britain. The gambling industry now anxiously awaits clarification of the tax implications of the new regime.

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Gambling Reform
Debbie Heywood

Debbie Heywood 

Recent statements made by John Penrose leave no doubt that a regulatory regime of mandatory domestic licences will be adopted and that it will no longer be possible to lower tax liability by using an off-shore base.

"It is the likely significant hike in their tax liability which is the greatest cause for concern and some companies are suggesting it is the British consumer who will suffer as a result through increased charges"