Challenge to UK's new gambling tax regime referred to European court

Implemented in December 2014 by the Finance Act, the new regime introduced a 15% levy on remote gaming and betting activities carried out with a 'UK person'. The Gibraltar Betting and Gaming Association (GBGA), which represents a number of Gibraltar-based gambling operators that provide remote gambling services to UK customers, has argued that this restricts free movement of services in breach of article 56 of the Treaty on the Functioning of the European Union (TFEU).

Mr Justice Charles said that there was a "high probability" that the issues raised by the GBGA would have to be referred to the CJEU at some stage, even if he decided against it in the present case.

"I do not see how it can be said that the answer is clear enough for me either to find in favour of any of the primary arguments put to me … or to depart from [the judge's view in a previous case] on the appropriateness of a reference," he said.

The GBGA applied for a judicial review of the new tax regime last year after it lost a legal challenge to a new remote gambling licencing regime that is also based on a 'point of consumption' approach. Since 1 November 2014, businesses wishing to advertise or provide remote gambling services to UK consumers have had to obtain a licence from the Gambling Commission to do so.

At least 55% of remote gambling services provided to UK-based customers are provided by companies based in Gibraltar, Mr Justice Charles said in his referral. He said that it was "clear" that the main purpose of the new tax regime was to ensure that "the providers of remote gambling services to UK customers wherever those providers are based … pay tax on this economic activity with their UK based customers".

"The Revenue argues that these results flow from the fiscal sovereignty of the UK (and Gibraltar) in respect of an internal (domestic) taxation regime that is non-discriminatory," he said.

"The principle … relating to fiscal sovereignty is not disputed by [the GBGA]. Rather it disputes its application to the new tax regime because it asserts that the Revenue's position is premised on two false propositions, namely that the imposition of duties such as those introduced by the new tax regime is a matter clearly within the UK's fiscal competence over which it may exercise its sovereignty, and the disadvantages to foreign providers that result from the new tax regime can be characterised as consequences of member states' parallel exercise of such competence," he said.