UK-licensed bookies targeted with racing levy changes
Government to extend levy to all UK operating licence holders as tax on foreign-based customers is deemed "disproportionate"
The UK Government is planning to widen the scope of the horseracing levy by linking the scheme to the recently passed Gambling Bill, effectively bringing those licensed to operate in the market into its net.
As part of a consultation launched last week, the Government stated the levy would be extended to include remote operators for the first time in order to “provide a fairer basis for competition” between remote and onshore bookmakers.
And in order to implement this extension, the Government has proposed that the definition of the term ‘bookmaker’ be changed so that it includes all holders of Gambling Commission-issued operating licences “ at present only onshore operators pay the levy.
The Government has also said the levy shall be applied to all profits derived from the offer of British horseracing, no matter where the customer resides.
According to Olswang gaming lawyer Dan Tench, taxing the profits of foreign-based customers “does not seem justifiable” and may provide a barrier to entry for some overseas operators.
“Imagine a bookmaker with a substantial overseas client base betting on British racing but no British customers – it would pay no levy,” Tench said.
“But if it wanted to break into the British market, it would suddenly have to pay levy not only in respect of its new British customers but also its existing overseas ones. Such a barrier to entry seems disproportionate,” he added.
If the changes come into effect, it will mean UK licence holders will not only have to pay a 15% profit tax to the Treasury, which comes into force this December, but also an additional tax on UK horseracing profits “ which this year was broadly set at a rate of 10.75%.
According to the Gibraltar Betting and Gaming Association (GBGA), which recently requested a review of the Gambling Bill ahead of a potential legal challenge, the levy proposal only strengthened its belief that the Government was concentrated on raising taxes.
“This shows the real reason for point of consumption regulation: it’s all about revenue generation not consumer protection,” a spokespoerson for the GBGA told eGaming Review.
It is hoped that the new levy will be in place in time for the 55th levy negotiations in 2015, although this is dependent on parliamentary process and the amendments gaining necessary clearance from the European Commission due to the levy’s state aid status.
The Government also used the consultation, which closes on 21 August, to request feedback on its Bookmakers’ Committee, which is formed of members including those from Coral, Ladbrokes, William Hill and Betfair and sits to recommend levy rates and conditions.
This Committee may have to undergo some change if it is to continue to reflect the make-up of the soon-to-be-increased number of operators paying into the levy.
The new levy is expected to bring in additional revenue for which the Horserace Betting Levy Board will use to help improve the sport and the breeding of horses and improve veterinary science.
Some observers believe the proposed changes may just be a short-term solution to a long-term funding problem for UK horse racing and chancellor George Osborne earlier this year announced the government would look at the possibility of an alternative ‘betting rights’ licence.