Taxing free bets gets back to the fore

Increased speculation had arisen back in July that the UK government intended to impose tax on free bets and related offers. Although this rumor had surely shaken the betting industry waters, it came in complete contrast to the Government 2017 financial bill that had already removed this ruling.

However, it seems there is no smoke without fire as the HM Revenue and Customs announced that it has actually decided to reintroduce the proposed tax on free bets.

Jason Fisher, Senior Associate at Wiggin LLP said: "About three weeks ago the Government issued a Written Ministerial Statement which confirmed the intention to legislate for all measures dropped from the pre-election Finance Bill, including certain provisions which will still commence as originally planned but be given retrospective application if relevant. HMRC has confirmed to the RGA that the free play provision is one such provision.”

The HMRC revealed that the tax will be enacted on 1 August 2017, under revised legislation. The expected profit from taxing free bets amounts to a sizeable extra £45m in the first year and is expected to be increased up to £110m by 2020/21.

Squire Patton Boggs Partner, Carl Rohsler stated: “The changes originally proposed in the earlier Finance Bill were shelved and have now been introduced post-election. It is said that they aim to create a more logical treatment of all forms of free bet (whether offered in the course of betting or gaming) which had previously been treated differently. The net effect is to increase the overall taxation burden on the gambling community. One major concession which was given as a result of government consultation was that free bets will only be taxed on the first occasion that they are offered, and not when they are “re-bet” during the course of play (as is usually a condition of the bonus offer). There has been little reaction from the gambling fraternity, but any change to the taxation structure is likely to put pressure on some operators to limit the use of free betting as a marketing tool. But given the extent to which free bets and bonusing is a necessary part of the ever –continuing struggle to attract and retain players, it seems likely that the larger operators will try to bear most of the burden and continue to offer free bet bonusing.”