British Horseracing Board's Demands Could Tax Off-Course Punters Again

by Jason Gorringe, Tax-news.com, London

13 April 2001

In the UK budget last month, Chancellor Gordon Brown scrapped the country's 9 per cent duty on betting in favour of a tax on bookmakers' profits - known as the Gross Profits Tax - but reports surfacing this week suggest that off-course punters could still finish up paying tax on their bets. As offshore bookmakers ponder whether to move back to the UK in light of the betting tax changes, which are due to come into effect on January 1 2002, punters are now facing the possibility that the horseracing industry could be responsible for the imposition of a tax on off-course bets.

The problem stems from the sale of media rights. A 27-page submission by the betting industry to the Home Office has warned that if the government agrees to British Horseracing Board (BHB) plans for a new funding system through the sale of media rights, the sport could charge bookmakers whatever it liked. Currently, the horseracing industry pulls in a tidy £60 million a year from the Levy system, but under the proposed new funding mechanism, it is expected to want want a sum equivalent to four per cent of bookmakers' turnover in future - around £280 million per annum.

Earlier this week Warwick Bartlett of the newly-formed Confederation of Bookmakers charged: 'Four per cent would be a ridiculous amount and if they charged it they would be abusing their dominant position and we would be justified in going to the Office of Fair Trading. If it went ahead the punters are going to have to pay. The four per cent would be passed on to the customer - in fact it would have to be five per cent to offset the fall in turnover. That would undermine the fabric of what the government is trying to do by abolishing betting tax. It is the first opportunity since 1966 to bet tax free and these people are going to destroy it. The government is going to see what's happening and put the tax back on.'

Bartlett continued: 'The Levy worked because it provided income which was tax free.What the bookmakers are saying is that the Levy system has served racing well and the sale of any media rights would be subject to VAT and that would therefore mean that income would be reduced by a fifth. We would want something sorted out by the autumn because we are then due to negotiate the 41st Levy deal, which is supposed to be the last.'

Peter Savill, chairman of the BHB, said he was not surprised by the bookmakers' response: 'The Levy system favoured the bookmakers and allowed them to make the offers. It was a case of the buyer having control over the seller. They wanted to make a minimum payment and the levy system enabled them to do that. Obviously that was not right. Now we have the prospect of a commercial replacement mechanism whereby there must be enforceable payment for pictures and data.....what we must make sure is that the price is fair and reasonable and will stand up to the scrutiny of the Office of Fair Trading or the European Union. I will be disappointed if the betting industry has to resort to legal action. If the price is justifiable this should not be necessary.'

The BHB met with the betting industry last week to discuss the issue and despite the profound clash in the interests of the two parties, Mr Savill described the talks as a "useful, initial exploration" of the subject. The BHB's latest move - which could significantly sting punters - seems to contradict comments it made at the beginning of March, when it said it welcomed the abolition of general betting duty. At the time, BHB Secretary-General Tristram Ricketts said: 'We are very pleased that the Chancellor has responded so positively to the strong representations from the British Racing and betting industries. The replacement of General Betting Duty with a Gross Profits Tax at will enable the domestic betting industry to offer a highly competitive service against those overseas bookmakers who charge low, or no, tax to their customers. The anticipated resultant increase in betting turnover will benefit all parties in the longer-term.' Somehow, that no longer seems to ring true.

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