UK Gaming Company Exodus Begins

by Robert Lee, Tax-News.com, London

11 August 2009

Ladbrokes has announced that it will follow suit with William Hill and relocate to Gibraltar by the end of the year, in order to maintain international competitiveness.

Currently, Ladbrokes’ sportsbook operations are based in London and incur 15% Gross Profits Tax and 15% VAT on input costs, as well as corporation tax. British-based bookmakers must also pay a Horserace Betting Levy of 10% of profits on British horseracing. Ladbrokes expects that moving offshore will substantially reduce its tax liabilities – offshore regimes typically offer a corporation tax rate of between 1% and 2%, with no requirement to pay the UK’s horseracing levy.

Christopher Bell, Chief Executive Officer of Ladbrokes, commented: "Our award winning sportsbook is the biggest in the UK market but faces aggressive competition from offshore operators who hold a very significant cost advantage by operating from low tax jurisdictions. Operating from the UK has become unsustainable and we will relocate by the year end."

The announcement was disclosed within Ladbrokes half-year results, released August 6, which noted that profits had declined due to slower growth and increasing levels of competition from offshore operators.

While Ladbrokes will relocate its online operations to Gibraltar, it will retain its call centre operations for telephone betting in the UK. “A number of cost reduction measures are being taken to safeguard the future of the business including redeploying staff and utilising new technology to reduce costs per call,” noted Ladbrokes interim results.

It would appear that William Hill, which on August 4 announced its decision to move offshore, has triggered a mass exodus; Betfair, another online UK gambling company, in an interview with The Guardian newspaper, underscored that it had not ruled out a similar move, noting that the UK’s tax regime was "not ideal" and put it "at a competitive disadvantage."

Recommended