Finance (No.2) Bill



1.1 The Gibraltar Betting and Gaming Association (the "GBGA") offers this written evidence to the House of Commons Public Bill Committee in relation to Part 3 of the Finance Bill (No. 2) 2014 which amends the Betting and Gaming Duties Act (1981).

1.2 This evidence covers:

1.2.1 The fundamental difficulties with seeking to impose duty on overseas operators on a place of consumption basis and the anomalous and unfair results likely to arise.

1.2.2 The inadequate information gathering and enforcement powers of HM Revenue and Customs ("HMRC").

1.2.3 The competitive advantage granted to operators that do not register for tax resulting in increased risk to consumers and the potential for reduced receipts.

1.2.4 The GBGA's proposals to alleviate the difficulties and risks highlighted.

1.3 In doing so this evidence considers the Bill and the associated "Gambling Tax Reform 2014" Information Notes published by HMRC.


2.1 The GBGA represents nearly all of the remote gambling operators based in Gibraltar. At least 60% of remote gambling by UK consumers is with Gibraltar operators, the overwhelming majority with GBGA members.

2.2 Gibraltar operators and the Gibraltar regulator have over 15 years of experience at the top of the remote gambling market. The GBGA has sought to engage constructively with HM Treasury, HMRC, the Department of Culture, Media and Sport and the UK Government in order to provide its views and proposals based on this experience. The GBGA wants to work with the UK Government in order to ensure that online gambling consumers and the industry are not put at risk as a result of amendments to the taxation and licensing regimes.


3.1 The Bill seeks to amend the statutory liability for general betting duty, pool betting duty and remote gaming duty (together the "Duty") on remote gambling from a place of supply basis to a place of consumption basis. This ostensibly makes all operators, wherever in the world they are based, liable to pay Duty to HMRC. However, the liability to pay Duty is limited to supplies of gambling services to the UK. This means that it is necessary to determine whether a particular supply by an operator is to the UK or to elsewhere for the purposes of the Duty.

3.2 The detail of the provisions in the Bill and the Information Notes show that drawing a distinction on a place of consumption basis is inherently difficult and the UK Government's proposals are unworkable. The Bill sets out conditions providing for the circumstances in which duty will be chargeable if a relevant person is deemed to be a "UK person".

3.3 However, the conditions are framed exceptionally widely, are poorly defined and are inconsistent. The following three examples illustrate this concern:

3.3.1 Bets may be made by agents on behalf of the principal. Duty is to be assessed on bets made where the principal (as opposed to the agent) is a UK person. This is absolute - there is no exception for circumstances where the operator did not know and/or could not reasonably have known that the principal was a UK person. There has been no guidance as to how a remote operator is expected to ascertain the location of the principal rather than the agent placing the bet. If customers can avoid having Duty charged on their bets (which may well mean more favourable odds) simply by channelling them through agents outside the United Kingdom, a significant amount are likely to do so.

3.3.2 Duty is to be assessed on bets made where the operator knows or has reasonable cause to believe that a "potential beneficiary" of the winnings of a company incorporated outside of the UK is a UK person. There is no definition of "potential beneficiary" and it is entirely unclear whether it extends beyond formal trust relationships to any person with an interest in a business.

3.3.3 Under the provisions, a person is deemed to be a UK person if he or she "usually live" in the UK. Information Note 2 provides that this test will be met if an individual provides a UK registration address, does not provide a registration address or provides a non-UK address but any two other indicators point towards resolve to the UK. This is extraordinarily wide, will require the constant monitoring of an operator’s non-UK customer base (being administratively burdensome and expensive) and would result in significant overlap if it was applied in more than one jurisdiction.

3.4 The wide definitions are particularly problematic because the Bill proposes to remove double taxation relief, contrary to customary international law.

3.5 The Bill has a particularly disproportionate effect on overseas operators for whom the UK market is only a small part of their offering. They will have to go to the substantial trouble of understanding and implementing to provisions to determine those bets on which Duty is to be assessed, obtaining the necessary information from customers and submitting a return. This would be an extraordinary imposition on businesses in distance jurisdictions who may have no significant and concerted intention to provide services to customers within the UK.

3.6 There are also significant points that are still unclear in the Bill. Some complex issues have not been resolved and instead have been delayed to be dealt with by HMRC notice. In particular, the Bill affords HMRC a very wide discretion to impose security requirements on operators (which are discussed further below).


4.1 The Bill will create significant advantages to unscrupulous unlicensed and unregulated operators to target UK customers and does not create any effective deterrent to non-payment or under payment of duty.

4.2 Fundamental to the proper and fair implementation of any tax-raising regime are proper information gathering and audit powers. These simply are not provided for in the proposals and the UK Government cannot unilaterally grant HMRC effective extra-territorial powers. Operators that voluntarily allow HMRC access to their premises, such as the GBGA members, will be at a substantial disadvantage.

4.3 It has not been explained how the Mutual Assistance with Recovery of Debt provisions assist.

4.4 The proposals in HMRC's Information Notes regarding fiscal representatives, administrative representatives and security payments risk further distortion and unjustifiable restriction of the lawful market. Operators based in the UK will naturally be favoured. The consequences could be very significant given security provision of six months' liability has been proposed.


5.1 There is a major practical issue with the Bill. The rate of taxation has been set too high and will therefore make licensed tax paying operators less competitive and encourage and accelerate a migration by UK consumers to the unregulated market. This concern was recognised by the Culture, Media and Sport Select Committee and there is strong evidence of migration to the unregulated market in various continental markets where there are restrictive licensing and taxation regimes.

5.2 There is a fundamental difference in the regulation and control of remote as opposed to land based gambling. There is a greater degree of competition in the online market and UK customers can find operators, including unlicensed operators, easily. This difference justifies a distinction in the taxation regime and rate (as the UK Government already does in relation to gaming duty).

5.3 HM Treasury and HMRC have not conducted a full regulatory impact assessment. Nonetheless, HM Treasury has proceeded on the basis that 20% of remote gambling by UK consumers will not be captured in the new regime.

5.4 We encourage the UK Government to conduct a full impact assessment.

5.5 We consider that it is also important to have regard to the impact the proposed regime will have on overall receipts. The UK Government will no longer receive duty in respect of services offered by UK operators to non-UK consumers. A duty on non-UK operators that drives customers to the unregulated market will, combined with this, result in a significant drop in receipts.


6.1 The GBGA is concerned to find a solution that meets the UK Government's objectives, is compliant with EU law and is in the interests of UK consumers.

6.2 The GBGA has proposed to the UK Government a combined solution encompassing both the headline rate and the basis of taxation to produce a lower effective rate. The proposals in relation to deductions are designed to ensure that licensed, tax-paying operators are still in a position to attract customers whilst complying with their licensing and tax obligations.

6.3 We consider that the following are necessary and proportionate amendments to the Bill to avoid consumer harm from large-scale migration to the unregulated sector:

6.3.1 a headline rate of below 10%;

6.3.2 excluding from taxation items that do not constitute genuine receipts (such as free bets), marketing costs, integrity and compliance costs and software costs;

6.3.3 allowing double taxation relief;

6.3.4 proper monitoring of the effects of the duty regime on the industry and consumer protection.

6.4 These proposals are consistent with EU law and policy.

6.5 We would welcome the opportunity to discuss the detail of this evidence including the proposed solution with the UK Government, HM Treasury and HMRC.

May 2014

Prepared 14th May 2014