Betfair In Gibraltar Move

by Robert Lee, Tax-News.com, London

10 March 2011

The gaming operator Betfair is to cease operations under a British gaming licence with effect from March 9, making it the latest operator to leave the UK after a steady stream of exits in recent years.

As of March 9, Betfair will join rivals Ladbrokes and William Hill in Gibraltar, where its licence will henceforth be located. In a conference call held on March 8, chief executive David Yu said that the move would have a positive impact on the business, largely effected by gross profits tax savings. The gaming industry currently pays a gross profits tax of 15%, but, upon arrival in Gibraltar, Betfair can expect to pay 1%. Yu said that the savings would initially be offset by the higher operational costs involved in the new technological initiatives the firm was rolling out, but that, for the 2012 financial year, the overall saving was expected to be approximately GBP10m, with the figure increasing to an estimated GBP20m for the following financial year.

Nonetheless, the company will remain incorporated in the UK, and will retain its 1,200 employees based in the country, while, in addition, establishing a new office in Gibraltar. Last year, Betfair opened an operational base in Ireland, migrating its technology structure there. Yu said that the combined effects of these new departures "provide us with increased flexibility", and "allow us to locate key technical equipment in more efficient locations, to serve our customers better and to compete on the same basis as the majority of operators in the UK online betting market”. Despite the change in its licensing structure, the company will continue to pay the horseracing levy charged to all those with a UK gambling license, in order to support the British horseracing industry. This, Yu says, "is the right thing to do".

The news of Betfair's departure will certainly add to the pressure mounting on the Chancellor to amend the taxation regime imposed on the British gaming industry. When Ladbrokes relocated to Gibraltar in 2009, the then chief executive Christopher Bell stated that "operating from the UK [had] become unsustainable."

The occasion for the announcement was the release of Betfair's interim management statement for the three month period ended January 31, 2011. Overall revenue was up 6.2% year-on-year, to GBP77m. Sports revenue increased 8.6% to GBP56.6m, games revenue rose by 8.2% to GBP14.3m, and poker revenue was down 20.5%, to GBP5.2m.

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