UK Point of Consumption tax goes live

The online gaming industry today entered into a new era of higher taxes and lower margins after the UK Government implemented its controversial Point of Consumption (PoC) tax, despite a legal challenge to the levy still on the cards.

According the Government, the new levy, which will see operators hand over 15% of gross profits derived from UK-based customers, has been introduced to “level the playing field” between UK and offshore operators.

“The new rules will provide a fairer tax system for all gambling operators,” Priti Patel, Exchequer Secretary to the UK Treasury, said.

“Those businesses that moved their operations abroad to avoid paying UK taxes will now have to pay their fair share of tax,” she said.

“The Government has created a level playing field across the gambling industry so that all gambling by UK consumers is now subject to UK tax,” she added.

However, the tax could yet be overturned in the courts with the Gibraltar Betting and Gaming Association (GBGA) preparing to challenge the compatibility of the tax raising measure with European law.

Speaking to eGaming Review this morning, GBGA chief executive Peter Howitt said it was still waiting for a judge with “suitable tax experience” to be appointed before a court date could be set, although conceded a successful challenge would be “politically difficult”.

“I think we have a good case to make but I’m always hesitant to say we are confident in litigation, especially when you are challenging a sovereign state on an area of taxation,” Howitt said.

“The litigation has a lot of elements that make success politically difficult but the Association believes there are some key issues that need to be addressed,” he added.

The introduction of the tax comes one month after the implementation of the PoC regulatory regime, a double whammy some observers said could reduce the appeal of offshore jurisdictions such as Gibraltar and the Isle of Man.

However, Gibraltar has been buoyed by recent news that bet365 located its entire global operations on the peninsula while Boylesports is also set to relocate to The Rock.

Meanwhile, Peter Greenhill, head of e-gaming for the Isle of Man Department of Economic Development, said the introduction of PoC would have “minimal” impact on the jurisdiction due to make-up of its operators’ customer base.

“The effect of POC on the Isle of Man online gaming sector will be minimal compared to other jurisdictions due to the fact that, despite each Isle of Man licence holder having a different operating strategy and very different player profiles geographically, the vast majority of players using Isle of Man operators reside outside the UK,” Greenhill said.

It is estimated that the tax will raise around £300m per year for the UK Exchequer.