New UK iGambling Law Raise Costs For Operators

Home » Poker News » New UK iGambling Law Raise Costs For Operators

Tuesday, September 23rd, 2014 | Written by Shane Larson

Tired of online gambling companies avoiding UK taxes by locating their operations in offshore jurisdictions such as Gibraltar, Malta or Antigua, the UK government is set to introduce its new ‘Gambling, License and Advertising Bill‘ on October 1st. The new legislation requires iGaming businesses to obtain a special UK license in order to offer their products inside the country, whilst also then being subject to a 15% tax on any profits derived from UK wagers.

However, the new system has caused a certain amount of turmoil amongst online gambling operators, with a number of popular sites opting to completely withdraw from the market or alternatively radically change their fee structures for British customers.

Cost of doing business

In the past, online operators offering their products in the UK could avoid paying British taxes, but now many may be inclined to return to the British mainland in order to avoid double taxation. Its also possible those overseas jurisdictions may decide to alter their fee structures to account for the new taxes and cost of doing business in the UK, but in the meantime that hasn’t stopped the Gibraltar Gaming Commission from launching a lawsuit with the EU over the new legislation.

While Victor Chandler and a number of other operators have decided to join the lawsuit, others such as William Hill, and Ladbrokes seem ready to accept the new tax and licensing system and consider it just the cost of doing business in the UK.

Advertising limited to licensed companies

Another element to the new scheme is that only licensed companies will be permitted to advertise and promote their products in the UK, unlike in the past when exceptions were made for “white list” jurisdictions, such as EEA countries, Alderney, Antigua and Barbuda, Gibraltar, and the Isle of Man.

Grey market operators not welcome

However, certain hurdles still remain before receiving a UK license, not least the caveat that any company applying for a UK licence must not derive more than 3% of its online gaming revenues from ‘grey markets.’ As a result, the new regulations will force many big companies to either alter their operations, or exit Britain’s domestic market altogether. Commenting on the situation, Remote Gaming Association CEO Clive Hawkswood, said:

“While the new law will impact companies like William Hill, PokerStars and even Bodog it likely will have little effect on companies located in other jurisdictions like Costa Rica or Kahnawake. Companies in those locations are already offering betting to U.S. citizens without any real concern as well as to customers from countries like Germany and France. And it is becoming quite clear that despite any threats in the end the regulators in those countries have no way of enforcing their laws against them nor do they really have a desire to do so.”

Exodus of online sites from UK

Amongst the companies viewing the new regulations as too restrictive and so deciding to exit the UK iGaming market are Mansion Poker and 12bet, while other companies such as Winamax and TurboPoker are currently carefully weighing up their options.

In the meantime, sites such as PokerStars, 888Poker, Full Tilt, partypoker, Paddy Power, Ladbrokes, William Hill, and Bet365 are expected to apply for a UK license in order to continuing their operations inside a lucrative online gambling market worth £2.5 billion ($4.26bn) in 2013.

PokerStars to migrate to new UK site

PokerStars has already revealed its strategy for dealing with the new UK Regulation, and on October 1st the site will migrate to PokerStars.co.uk, with UK residents then needing to install new software to continue playing as usual. Nevertheless, the experience of its customers will remain unaltered with Usernames, passwords, and VPP balances all moved automatically, and all players still enjoying access to PokerStars’ global poker pool.

Finally, the 15% tax on gross profits UK iGaming operators will now have to pay has forced PokerStars to announce a slight reduction in its VIP Club rewards, which will now be slightly less than its dot-com program.

UK still offers competitive rates

Despite the stir, the UK’s new tax rate of 15% is still amongst the lowest of all Europe’s regulated iGaming markets, with less competitive rates seen in other countries such as France, Spain, Italy and Denmark. Furthermore, more stringent regulations are a natural progression for the industry as a whole, and as Gaming Association CEO Clive Hawkswood, explains:

“This is just one more predictable move by bigger states wanting to benefit from the revenues on what they see as their players rather than seeing the economic benefits accrue in smaller countries like Malta etc. It is an irreversible trend, but at least the UK is not making operators physically relocate so offshore jurisdictions can still retain employment and other benefits. To that extent the UK is still hugely more flexible than the USA, Germany, France and so on.”