UK Budget 2016: New Budget Requires Online Casino Operators Pay Tax on Free Bets

March 22nd, 2016

SHARE

UK Budget 2016: New Budget Requires Online Casino Operators Pay Tax on Free Bets

Amid the fallout from UK Chancellor George Osborne’s 2016 budget is the news that online casino operators serving the country will be required to pay tax on free bet promotions. This is likely to cause yet more change in a UK gambling industry that's faced with greater tax commitments than ever before.

When announcing his budget, Osborne revealed operators would have to pay the pre-existing 15% General Betting Duty (GBD) on all free or discounted bets from 1st August 2017. Sports betting operators already had to pay the duty when it was introduced on 1st December 2014, but online casinos and bingo sites had been spared the duty.

Remote Gaming Duty

At the time, the UK’s laws were adjusted so that the government could levy a 15% point of consumption tax (POCT) against offshore operators servicing British residents. By locating in low tax environments like Gibraltar, some operators had avoided paying tax on their UK profits.

Now, however, the Remote Gaming Duty (RGD) has been put in place to ensure online gambling operators pay 15% tax on UK profits. Gibraltar Betting and Gaming Association (GBGA) - an organisation defending the rights of online gaming companies based in the region including operators like 32Red and software suppliers IGT - tried to dispute the duty in the UK at the High Court, but this was rejected. A subsequent appeal is in process with the Court of Justice of the EU, as of July 2015.

Budget Reactions

Despite learning of Osborne’s latest tax reform, the industry reaction was somewhat positive. Ladbrokes Director of Media David Williams shared the following comments with Bloomberg Business:

"We’re not leaping for joy, but are pleased we haven’t been subjected to yet more regulatory burdens around things like machines."

The machines referenced by Williams are fixed odds betting terminals (FOBTs), which incurred a tax increase from 20% to 25% in 2014. Given that the UK had more than 33,000 FOBTs at the time, this change led to falls in the respective share prices of William Hill (7%) and Ladbrokes (12%) that year.

Alongside FOBTs, some media outlets had reported operators were also afraid of online advertising restrictions, but they were also spared on that front.

Rising Share Prices

Ahead of the midweek budget announcement, Ladbrokes’ shares fell 5% to 114.8p on the Monday, driven by a concern that Osborne would increase the duty on FOBTs. Following the budget, however, Ladbrokes’ share price recovered 8.5% to 124.7p.

There was yet more positive news from the major UK gambling operators, with William Hill recovering from a Monday decline to increase 4.6% to reach 382p following the budget. Another beneficiary was the new merger between Paddy Power and Betfair, which rose by 1.16% to £91.40.

The rising share prices come after a difficult time in which operators have reported falling profits after their first full year with POCT. In February 2016, William Hill cited an £87m tax increase as the reason for profit after tax decreasing by 8% in 2015. Also in February, Ladbrokes revealed its first annual loss in ten years after paying an extra £50m tax in 2015.

Considering the increased tax burden, the UK gambling industry is now a tougher environment for operators, as shown by the 2015 struggles of William Hill and Ladbrokes. As a result, some view Osborne’s free bet tax as a positive outcome from what could have been a more severe budget for gambling operators.

Casino News Articles


Online Gambling Bets Expected To Reach $1 Trillion By 2022
Online Gambling Bets Expected To Reach $1 Trillion By 2022

Recent data collected by Juniper Research, which claims online gambling will reach $1 trillion globally by 2022, points to continued growth of the online gambling industry as online casinos employ ... Read More

LeoVegas Approved for Main Nasdaq Stockholm Listing
LeoVegas Approved for Main Nasdaq Stockholm Listing

After enjoying incredible growth over the past financial year, the LeoVegas group has taken another mighty leap forward with its listing on the Nasdaq Stockholm exchange being formally approved and ... Read More

Playtech Launches Second Highly-Anticipated Gladiator Slot
Playtech Launches Second Highly-Anticipated Gladiator Slot

Given the success of the original Gladiator slot, the only surprise regarding Playtech’s decision to release a sequel to the all-conquering game is how long it has taken to make! The first Gladiator ... Read More

William Hill Forecasted to Exceed 2017 Profit Expectations
William Hill Forecasted to Exceed 2017 Profit Expectations

A strong year both in the UK as well as the United States has seen bookmaker William Hill predict better than expected year-on-year profits. According to a trading statement released on January 15, ... Read More

Evolution Adds Live Texas Hold'em Bonus Poker To Portfolio
Evolution Adds Live Texas Hold'em Bonus Poker To Portfolio

Evolution Gaming has added a brand new Live Texas Hold'Em Bonus Poker game to the company's already impressive portfolio of live table games. The game was created in partnership with Games Marketing ... Read More

Gaming Realms And 888 Sign Slingo Game Distribution Deal
Gaming Realms And 888 Sign Slingo Game Distribution Deal

888 Holdings PLC has entered into a revenue share and licensing agreement with Gaming Realms PLC for the distribution of new ‘Slingo Originals’ content. Under the three year deal, 888 will host ... Read More

Casino Navigation

Newsletter

Sign up for the free Gambling.com Newsletter to stay on top of all the best bonuses!
We will never share or misuse your personal information. Privacy Policy

Latest Casino News

Casino Guides

Country Guide

DISCLAIMER: Online Wagering is illegal in some Jurisdictions. It is your responsibility to check your local regulations before playing online. GDC Trading Ltd takes no responsibility for your actions.
© 2011-2018 GDC Trading Limited. All Rights Reserved. Gambling.com is a registered trademark of GDC Trading Limited.
Terms and Conditions   |   Privacy Policy

Asset 4AndroidGET IT ONfacebookDownload_on_the_App_Store_Badge_US-UK_RGB_blk_4SVG_092917twitter