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UK – UK introduces Point of Consumption tax for online gambling

By - 1 December 2014

The UK’s rules for General Betting Duty (GBD), Pool Betting Duty (PBD), and Remote Gaming Duty (RGD) changed from December 1 2014.

The new rules affect the remote gambling industry who offer remote betting and gaming to UK consumers from outside the UK and UK land based betting business such as high street betting shop. Land-based gaming sector such as casinos and bingo halls will not be affected by these new rules unless they offer remote betting or gaming.

Premises based betting and the treatment of spread betting will be unaffected except for some administrative changes.

Previously, gambling activities have been taxed on a ‘place of supply’ basis. This means that if an operator is supplying gambling from the UK, they pay tax on all their gross gambling profits. Operators supplying UK customers from outside the UK pay no UK gambling taxes.

From December 1 2014 HMRC is changing how these duties are taxed from ‘place of supply’ to ‘place of consumption’. This means that online operators will become liable to one or more of the taxes (GBD, PBD or RGD), if you offer remote gambling to a person who usually lives in the UK. This applies no matter where in the world operators are based.

If an operator supplies remote gambling to UK customers from outside the UK they will become liable to a UK gambling tax for the first time and GBD, PBD or RGD will become payable. UK based operators who supply remote gambling to customers who do not usually live in the UK will no longer be liable to GBD, PBD or RGD on those transactions.

GBD is charged on a bookmaker’s profits on general bets or pool bets on horse racing or dog racing where the bets are made with a bookmaker by a customer who is present in a betting shop regardless of where the customer usually lives. It is also charged on spread bets, that is betting on the outcome of financial or non-financial fluctuations of an index where these bets are made with a bookmaker who is in the UK.

GBD is also relevant for general bets or pool bets on horse racing or dog racing made with a bookmaker, not in a UK betting shop, by a UK person regardless of where in the world the bookmaker is located
PBD is charged on a bookmaker’s profits from bets that are not at fixed-odds and are not on horse or dog racing, where the customer is present in a UK betting shop regardless of where the customer usually lives or the customer is a UK person regardless of where in the world the customer is located.
RGD is charged on a gaming provider’s profits from remote gaming played by a UK person.

HMRC is also moving to an online system for registering for these taxes and for making returns. HMRC can issue paper forms for registration and returns, but only if you don’t hold (and are not required to hold) a Remote Operating Licence (ROL) from the Gambling Commission (GC).

Pool bets on horse or dog racing are currently charged with GBD. This won’t change, but the method of calculating pool betting profits for tax purposes, for both GBD and PBD, will be amended to exclude non-UK customers from the calculation where it is appropriate to do so.

Peter Greenhill, Head of e-gaming for the Isle of Man Department of Economic Development, said: “The effect of POC on the Isle of Man online gaming sector will be minimal compared to other jurisdictions due to the fact that, despite each Isle of Man licence holder having a different operating strategy and very different player profiles geographically, the vast majority of players using Isle of Man operators reside outside the UK. The legislation does not force UK facing licence holders to set up their companies in the UK nor does it force the processing of bets to take place on UK servers meaning that our licensees on the Isle of Man can retain their current structures with all of the benefits that they bring.”

“The legislation also requires offshore licence holders to either appoint a UK based Financial Representative who, at great expense, will take responsibility and personal liability to pay UK HMRC the duty owed, or may negotiate to pay six months duty in advance,” he explained. “The positive news as far as the Isle of Man is concerned is that we have negotiated an arrangement with the UK tax authorities that UK facing operators licensed with us do not need to take on this vast expense. This represents a major saving over other jurisdictions.”

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