Tax on Free Spins Coming Soon to the UK?

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The UK Government has been one of the most active in taxing online gambling. Just when gambling operators adjust to the new landscape, they are forced to cope with fresh legislation. As of August 2017, it has been revealed that a bonus tax will be leveraged against online casinos, sportsbooks, and other gambling sites that provide freeplay offers.

2017 Finance Act

The HMRC tax authority is responsible for implementing the forthcoming betting tax. HMRC had first recommended the Remote Gaming Duty (RGD) to be included within the Finance Bill 2017. This had been included in the March 2017 bill that was presented to parliament, but the measure was shelved for the short-term.

At the time, MPs chose to pause the discussion of a casino tax because the 2017 UK General Election was soon to be contested. As a result, the MPs believed that there would not be enough time needed to sufficiently discuss the ramifications of introducing RGD on free spins and freeplay offers.

RGD Now Running

The exploration of the RGD first emerged during a summer 2016 consultation performed by HMRC. Fundamentally, the intention was for HMRC to ensure that free offers were treated in the same way as the pre-existing general betting duty (GBD). HMRC hopes to raise £45 million in year one, which could double to £110 million by 2020/21.

RGD took effect on 1 August 2017, with gambling operators now required to apply RGD on any free offers (termed as “freeplays”) that are delivered through the mediums of the web, mobile, TV, radio, or any other form of electronic communication. The policy can get quite complex, but the basic points are as follows:

·       The staking of freeplays by players will have no value in calculating an operator’s profit in regard to RGD.

·       HMRC is levelling the tax treatment between freeplays and free bets.

·       Freeplays can potentially yield a value that’s included in the remote gaming profits of operators.

·       Operators can no longer include freeplay prizes when calculating profits.

·       RGD will only be calculated when the re-wagering of freeplays have been completed.

What Does RGD Mean for Players?

The emergence of the point of consumption tax (POCT) forced UK-serving operators to pay a 15% duty on gambling profits and to also maintain a licence with the Gambling Commission. This already made it tougher for UK operators to maintain profitable operations, but this latest development will make matters even more difficult.

When freeplays were exempt from additional taxation, this gave UK gambling operators another promotional strategy for staying competitive and attracting new players. However, there could now be a decline in freeplays, and this would be to the detriment of players.

The calculation of taxing responsibilities and duties is a costly and time-consuming exercise for gambling operators. For them, it now makes less business sense to hand out freeplays that are as complex to operate as deposit bonuses, which actually include a financial commitment from players. Freeplays are likely to continue, but they will surely be smaller and less generous.

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