GB: Disappointing Budget, Levy and point of consumption. Does bad luck only run in threes?

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Explore:  Gambling Gaming UK

As if the tax whammy on bookmakers wasn’t enough, the voluntary code of conduct compelling bookmakers to take tougher precautions to ensure limits are placed on the amount of money and time spent on machines is set to become a series of binding licence conditions.  Likewise the primary purpose revisions may also impact shops, even if the retail estates are scaled back, given they will limit the machines that are made available for use.

The more tangible financial pressures will come in three ways:

The horserace betting levy is set include offshore bookmakers: A much broader consultation on levy reforms later this year will determine exactly the rate of tax imposed on offshore bookmakers. (The levy that applies to UK racing associated incomes in retail outlets is at a rate of 10.75%.)  This will catch operators who do not target the UK market too (i.e. who will not need a licence when the Gambling (Licensing and Advertising) Bill is implemented).

Point of consumption tax: remote gambling i.e. operators based offshores but supplying services in the UK will now also be taxed from the 1st December 2014 at a rate of 15%, a rate which has surprised no-one.

Machine games duty: This was the most unwelcome shock of the budget.  Operators who provide gaming machines where the charge payable for playing can exceed £5 will be effected (generally bookmakers and casinos).  The provision will mean there is a new 25% rate of machine games duty (MGD) due on net takings from machines where the charge payable (maximum stake) is more than £5 i.e. B2 machines.

It has been confirmed by HMRC that the increased gaming duty although primarily intended to affect B2 machines will also affect B3 content if available on a B2 machine. This means B3 content will also be taxed at the higher rate of 25% instead of 20%. If a machine provides B3 content alone then it will remain unchanged at a tax rate of 20%.  This higher rate of 25% is due to impact upon approximately 400 business running gaming machines where the charge payable for playing can exceed £5.  A number of operators have already indicated the huge financial impact of this change.  HMRC’s view seems solely to be that if the machines are profitable they want a larger proportion of those profits, irrespective of the wider social issues that are still being debated.

Also, the net result is that the same games will be taxed differently if played online in a betting shop or an arcade or casino.  Surely that must form the basis of a challenge? 

However, the bookmakers are going to suffer more indirect costs too.  The revised LCCP in conjunction with the primary purpose may impact staffing levels needed (staff to take the OTC betting and to supervise machine play).  Also it is difficult to know how that supervision may impact on non-harmful play.  Switching to SSBT’s only is not a solution given it will preclude machines being permitted on the premises.  In any event, the local authorities have powers to impose conditions on SSBT’s which is also not helpful given the uncomfortable stand-off currently between the bookmakers and some local authorities. 

Moreover, this B2 scapegoating still has to be put in the context of there still being no completed research and data in connection with the alleged harms of the B2 machines, which is why the focus on one type of premises is disappointing.  Also without clear data about player’s spending habits and likely harm triggers reducing usage of the B2's is only likely to redistribute the demand for machines outside LBO’s.

Topics:  Gambling, Gaming, UK

Published In: Art, Entertainment & Sports Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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