Read on below to see more details of the changes that are in store for UK punters...
To recap very briefly, the major change that was indicated in the budget was about the way tax would be paid by operators in the gaming industry. The proposed changes were to move from the current system - whereby operators pay tax only if they are domiciled in the UK - to a 'Point Of Consumption' taxation system - whereby the operator pays tax at 15% depending on where the customer is located, regardless of where the operator is domiciled for tax purposes.
In the last few weeks, further details of this have been revealed in a consultation paper. Gaming operators will have until 28th June 2012 to submit their feedback on the document.
The document can be downloaded here (PDF file).
Note - this is not due to come into effect until December 2014 at the earliest.
As a very brief overview of what is proposed, read on below... However note that this is only a consultation paper, so what is below is not necessarily what WILL be imposed, but what is being consulted on right now in preparation for a final change to legislation:
What it is:
The Point of Consumption Tax (POCT) details can be found in section 2.2 and effectively just says operators will pay tax on gross gambling profits generated from UK customers no matter where in the world the operator itself is located.
Section 2.5 says that the rationale for introducing the POCT is to create a more level playing field for those UK based operators who DO pay tax already, by imposing the POCT on overseas/remote operators who do NOT currently pay tax - everyone will pay the same amount of tax no matter where they are located.
Also they reason in section 2.6 that the application of a POCT will remove disincentives to remote operators basing themselves in the UK (since they have to pay the POCT no matter where they are based, they might as well move to the UK(!)).
Section 3 goes on to discuss the way in which the POCT will be implemented.
Section 3.7 specifically suggests that operators would be required to verify where in the world a customer is physically based using a combination of IP tracking, KYC/Know Your Customer checks and self verification. Additionally 3.8 suggests that operators would be expected to ensure that where there is a risk that UK customers might attempt to hide their real location, the operator should implement measures to mitigate that risk.
Section 3.10 talks about exchange betting POCT liability and indicates they would be liable to pay tax only on commission, not net take.
So what does this mean for UK punters?
In essence this is potentially very bad news for UK punters.
The majority of gaming operators - even those that are 'high street' names in the UK - are currently located in offshore locations for the sake of avoiding the current tax regime. These reforms are intended to hit those who attempt to avoid paying tax and force them to pay up by changing the way that tax is levied from a point of source to a point of consumption basis.
In future, if you are a gaming operator, it will not matter where in the world you are located - if you take gambling action / stakes from from UK residents, you must pay tax on any profits relating to that activity or face the consequence of being pursued by the UK government for non-payment of tax.
As a result this will probably see a large number of overseas / non-UK-highstreet bookies just close up shop for UK custom. Many European bookies will probably just opt to not allow UK customers to bet with them full stop - not unlike the way in which Interwetten and Jaxx closed their doors to UK customers by implementing geolocation blocking to block UK customers from accessing their sportsbook sites.
Additionally, the UK highstreet bookies that have no choice but to accommodate the POCT changes will have to initially absorb the additional costs. However in the long run there is little doubt that they will pass on these costs to UK punters - for example by:
- decreasing the value in their fixed odds on sports betting
- decreasing the payout levels on their online casino/gaming offerings
- decreasing the amount of bonuses they offer
Additionally, simply changing your apparent location by employing network address obfuscation techniques / IP address masking / using a foreign proxy so as to allow you to avoid being blocked by offshore sites that have implemented geolocation based blocking methods, will not work - or at best is extremely inadvisable. Unless you are also prepared to obtain documentation that indicates you are not based in the UK, you will at best end up losing any bonus+winnings when the offshore sites find out you are UK based via KYC checks and at worst you may find your funds being confiscated completely - with little to no chance of getting any redress via any regulator at all (since you have gone out of your way to defraud the operator by hiding your true location).
All of that said, of course if you were to move to Malta then that is a different story entirely....!
In summary, the changes are not due to be implemented until December 2014 at the earliest and it is only in the consultation stage at the moment. However as it stands it really doesn't look good for the UK punter unfortunately...
We will bring you more news as it arrives - this kind of thing is regularly in the newsletters, so if you receive that as a premium member keep an eye on that. For comments and discussion on this issue please use the following thread HERE