Remote Gaming Duty: reforming the tax treatment of freeplays
Published 5 December 2016
© Crown copyright 2016
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This publication is available at https://www.gov.uk/government/publications/remote-gaming-duty-reforming-the-tax-treatment-of-freeplays/remote-gaming-duty-reforming-the-tax-treatment-of-freeplays
Who is likely to be affected
Any remote gambling operators who are liable to account for Remote Gaming Duty (RGD).
RGD applies to gaming over the internet, telephone, by television, radio or other electronic communications.
General description of the measure
Gambling operators make use of a range of incentives and promotions including free bets, freeplays and other similar offers and discounts. For the purpose of this measure these are collectively referred to as freeplays.
Freeplays that are staked by customers when they participate in remote gaming are treated as having no value when calculating an operator’s profit for RGD.
Changes are being made to amend the current legislation that offers remote gaming operators a more generous tax treatment for freeplays compared to free bets in General Betting Duty (GBD).
This will mean that freeplays that are staked by a customer will, in certain circumstances, have a value for the purpose of calculating an operator’s remote gaming profits. These changes will also mean that freeplays given out by an operator cannot be treated as prizes and will have no value for the purposes of calculating profits. The net effect of these changes is to broaden the tax base and increase the amount of duty payable by remote gaming operators.
Policy objective
This measure is intended to bring the tax treatment of freeplays for remote gaming more into line with the treatment for free bets under GBD. This will contribute to sustainable government finances by broadening the Gambling Tax base.
Background to the measure
This measure was announced at Budget 2016 and was the subject of a technical consultation which ran between 9 August and 17 October 2016.
Detailed proposal
Operative date
The measure will have effect for any RGD accounting periods that begin on or after 1 August 2017.
Current law
The current law for RGD is provided by chapter 3 of part 3 of the Finance Act (FA) 2014. Sections 159 and 160 of FA 2014 define ‘gaming payments’ and ‘prizes’ for the purpose of calculating profits for RGD.
Proposed revisions
Legislation will be introduced in Finance Bill 2017. This will ensure where a customer makes use of an offer that allows them to gamble for free, or at a reduced rate, the operator will, in certain circumstances, be required to account for duty on the amount that the consumer would have paid without the offer.
The definition of ‘prizes’ will also be amended to ensure that operators cannot use the value of freeplays given as prizes to reduce their dutiable profit. These changes will have effect for accounting periods that begin on or after 1 August 2017.
Summary of impacts
Exchequer impact (£m)
| 2016 to 2017 | 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 |
|---|---|---|---|---|
| -20 | +45 | +90 | +100 | +110 |
These figures are set out in table 2.1 of Budget 2016 as ‘Gambling Duties: reform treatment of freeplays’, and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2016. There will be revisions to these figures which will be set out in Table 2.2 of Budget 2017.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
The costing includes a behavioural effect to account for a change in the marketing strategy of affected operators as well as the potential for firms finding ways to mitigate the impacts of the measure.
Impact on individuals, households and families
The impact on individuals and households in the UK is expected to be negligible as this measure is not expected to have a significant impact on the availability, price and payouts of remote gambling.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
This measure is not expected to have different impacts on any protected equality groups.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on businesses.
Currently there are around 130 businesses registered for RGD, who are expected to incur negligible one-off transitional costs associated with changing IT systems and familiarisation with the new rules. HM Revenue and Customs (HMRC) expects that operators will be able to access information on freeplays given out to customers and winnings from freeplays that can be paid out to customers, and therefore additional on-going burdens should be negligible.
This measure will have no impact on civil society organisations.
Operational impact (£m) (HMRC or other)
There will be no significant operational impact to HMRC.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be kept under review through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, please contact Brian O’Kane on Telephone: 03000 588011 or email: brian.okane@hmrc.gsi.gov.uk.