The UK’s bookmakers suffered some unfavourable racing results on the first day of the Cheltenham Festival but the Chancellor George Osborne spared them any further pain in his 2016 Budget on Wednesday. There were fears that he could increase Machine Games Duty (MGD) but the Chancellor did not announce any further increases. 

Those firms with online casinos, poker and bingo rooms, however, did see a further hit to their profits following on from the UK’s point of consumption tax.

The Chancellor has moved to end the differential tax treatment afforded to “freeplays” given as promotional bonuses to players. The Budget report states:
Remote gaming operators currently benefit from a more generous tax treatment when they offer discounted or free gambling (‘freeplays’) to customers in Remote Gaming Duty than would be the case for operators offering free bets on things like football and horseracing. The government will therefore amend the tax treatment of freeplays in Remote Gaming Duty to bring it into line with the tax treatment of free bets in General Betting Duty.

Freeplays relate to the scenario whereby players can play a game without having to place a stake or if the stake required is less than would be ordinarily payable.

Free bets on sports were already liable to tax under General Betting Duty because UK betting shops are already liable for the tax and the government did not want to create a discrepancy with online sports betting.

The Treasury forecasts this could bring in some significant additional tax revenues. In the four tax years between 2017/18 and 2020/21 it estimates a total of GB£ 345 million could be collected, all of which would come from the operators’ profits.

GBGC’s Director Lorien Pilling commented, “internet gaming operators have already been struggling to mitigate for the impact of the UK’s point of consumption tax in 2015. Operators have a bit of respite until this new tax hit comes into force from August 2017 but it is still further pressure on profits.”