Bookmakers Set To Abandon Offshore For The UK If The (Tax) Price Is Right

Amanda Banks, Tax-news.com, London

15 February 2001

With the UK budget three weeks away, hopes that betting duty will be scrapped have gained momentum - so much so that the entire betting industry is convinced that it is now a foregone conclusion and some that have moved operations to offshore locations to escape the penal 9 per cent UK betting tax are even considering a return to old Blighty.

Indeed, many employees of offshore bookmakers have expressed concern over their future as their employers are lured back to Britain. The government of Gibraltar, a popular offshore destination for many of the UK's betting operations with its betting tax of only 3 per cent, has raised concerns that the retreat of its bookmakers, which collectively employ around 500 people, will damage the local economy.

Since the November pre-budget announcement last year, when chancellor Gordon Brown spoke of the recent trend for many major betting outlets to relocate their operations offshore to escape the government's heavy betting duty, there has been much speculation over the government's plans. After realising the need to halt the exodus before the government loses out on betting revenue altogether, the Chancellor hinted that changes will occur by saying: 'There is scope to modernise the way betting is taxed in the UK, while protecting the long-term revenues from betting duty and giving punters a better deal.'

Gordon Brown has since indicated that he is considering the possibility of helping bookmakers become world leaders on the international betting market by replacing the current betting tax with a 15 per cent tax rate on bookmakers' gross profits. In return they would have to cease their offshore operations and return 'lock, stock and barrel' to the UK.

Ladbrokes employs 230 people and has stated that it has no plans to return to the UK at the moment but a spokesperson has commented that the company could review this in the future saying, 'if and when the situation comes up it will need to come under review, since we have to explore every possible option,' which is perhaps of small comfort to Ladbrokes local employees on the Rock.

Bob Scott, chief executive of Coral which also has an operation in Gibraltar, has indicated that his company is seriously considering giving up its offshore location. He told UK daily The Telegraph: 'We would be minded to come back here if the government sets a 15 per cent gross profits tax ... this is a real opportunity to get the UK racing industry - betting and the sport - on the map and make us world leaders. If the government gives us the opportunity, we will grab it with both hands.'

Since a number of bookmakers followed the lead of Victor Chandler in relocating offshore, it is estimated that the Treasury is losing approximately £50 million a year in betting duty from telephone bets alone. Currently the Treasury is seeing about £430 million a year in betting duty. Although the new 15 per cent tax would likely cost the government £150-200 million in lost revenue, betting turnover is calculated to grow by 25-50 per cent under the new tax system.

Also quoted by The Telegraph is David Harding, chief executive of William Hill, who said: 'A combination of 15 per cent gross profits tax and zero deductions would inevitably lead to turnover increasing by up to 50 percent. That creates a real profit and growth opportunity for bookmakers and, potentially, horse racing.' And Chris Bell, chief executive of Ladbrokes world-wide betting, said: 'If a gross profits tax is set at the right rate we would probably come back from Gibraltar.'

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