Tax Move Lures Bookmakers Back To UK

by Jason Gorringe, Tax-News.com, London

17 January 2005

The value of bets placed in UK betting shops has quadrupled since the government abolished betting tax and switched the tax burden to the profits of the bookmakers, prompting many firms to bring their internet and telephone operations back onshore, a new report has shown.

The review of the UK’s gambling duties under Customs & Excise by the National Audit Office has revealed that since the levy on bets was abolished in 2001, the value of stakes placed with betting firms has risen considerably, from GBP7.1 billion to GBP32.2 billion.

Encouraged by this dramatic increase in turnover, the NAO observed that the new tax structure has caused many bookmaking firms to bring their telephone and internet businesses back to the UK from offshore jurisidctions and retain their core operations in Britain.

However, while the NAO noted that this has protected revenues in the gambling sector, it warned that the emergence of a new breed of gambling firms, such as online betting exchanges, posed “new risks to (tax) revenues.”

Unlike the conventional High Street bookmakers such as Ladbrokes and William Hill, the betting exchanges do not pay a gross tax on profits, and the Treasury is currently reviewing the tax position of the new industry to clarify the uncertainty.

In order to protect revenues from the emergence of new e-gaming platforms, Sir John Bourn, the comptroller and auditor general, urged Customs to “refine its risk assessment” in order to take account of these new products.

"The challenge for Customs now is to keep pace with and develop its expertise to deal with new forms of electronic gambling,” Sir John stated.

“It should also complete its work on measuring the tax gap for gambling duties to ensure resources are targeted on the areas of loss,” he added.

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