Online ‘Free Play’ Will Not Be Taxed in the UK After All

HMRC accepted the operators’ remark the a free play tax would be too much of a burden.

The UK authorities have taken a stricter attitude towards all forms of betting and gambling and the operating costs for companies in the industry have been increased on several occasions in the past years. The operators don’t seem to be too happy about that, of course.

Earlier this year, at an event hosted by the All Party Betting & Gaming Group of the UK Parliament, representatives of several operators expressed their discontent the existing legislation. Then, in November it was announced that the Government is considering changes in the legislation that will result in taxation of free spins and bonuses, which would be a further financial burden for the operators. They hoped that this new tax will not be implemented, or at least, that its implementation will be postponed.

Operators Heavily Burdened by New Taxation

Due to the fierce reactions of the operators, the Government decided to revise its plan, even though earlier this year the then Chancellor George Osborne said that it is only fair to tax bonuses, as casino and betting operators are already subjected to a 15% general duty and that there should be no exemption from it.

The 15% online point of consumption tax that had to be paid on gambling revenues was enforced in 2014, much to the dissatisfaction of the operators. Moreover, those operators that have retail operations suffered additionally from an increase of the Machine Games Duty from 20% to 25%.

Therefore, it is quite understandable why the operators decided to raise their voices and object the plans for taxation of bonuses.

Earlier this week the Revenue and Customs department (HMRC) published the details of the technical consultations with the operators concerning the so called ‘free play tax’. Ten operators responded to the HMRC, along with three advisors and the Remote Gambling Association.

The HMRC Realised that a New Tax Would Be Too Much

Most operators were concerned that the draft legislation would not have the intended effect, and the only result would be an increase of their expenses. The drafted bill included provisions under which all free play bonuses would be subjected to taxation, including those that have specific wagering requirements.

Bonuses with wagering requirements oblige players to wager the bonus amount and their winnings multiple times before they are allowed to make a withdrawal of the bonus-related winnings. The drafted legislative solution was designed to treat these bonuses as taxable payments which and every wagering would have been taxed.

Operators rightfully pointed to the fact that such a strict and burdensome tax solution would impose an unbearably high tax requirement that will seriously hurt the market as a whole. Not only will that solution hurt existing operators, but it would prevent market competition, as offering free play bonuses is one of the most effective forms of marketing. We all know that new operators have to rely on marketing in order to attract players.

The HMRC realised that the concerns raised by the operators are valid and responded that amendments to the proposed legalisation will be made and the that only the first use of the free play bonus will be taxed and the winnings will be calculated only at the end, i.e. when the wagering requirement is completed.