The proposals formalise plans the government had previously announced outlined to introduce a new duty on remote betting activities carried out by a 'UK person'. A 15% duty will also be levied on remote gaming activities under the Bill.
The tax plans are envisaged to exist alongside a new regulatory regime for remote gambling that is based on a 'point of consumption' approach.
Plans to introduce a 'general betting duty charge on general bets' are contained in the new draft Finance Bill which has been reintroduced for scrutiny by the UK parliament. Under the Bill, a 15% duty would be levied on "the bookmaker’s profits on general bets for an accounting period".
A 'general bet' is defined as a bet which is neither an on-course bet, a spread bet or a bet made by way of pool betting and which satisfies at least one of three conditions.
The first condition is that the person making the bet "does so while present at a place in the United Kingdom where betting facilities are provided in the course of a business and the bet is made using those facilities".
The second condition is that "the person who makes the bet as principal is a UK person, and [that] the bet is not an excluded bet". A 'UK person' is defined under the Bill as "an individual who usually lives in the United Kingdom, or a body corporate which is legally constituted in the United Kingdom".
HMRC has published some draft guidance about what an operator must do to determine whether a customer is a “UK person”. The guidance sets out a requirement for operators to record the address at which their customers usually live. Operators must have a "robust system" to be able to verify whether the details customers provide about their address are correct. It is not acceptable for the companies just to "simply accept assertions from customers about where they live".
The guidance also explains how customers should be considered a 'UK person' for the purposes of the tax applying "regardless of their statement that they live elsewhere" in cases where two pieces of information, such as an address on a customer's bank statement or driving licence, is a UK address.
The 'UK person' test for calculating remote gambling tax obligations differs from the test that applies for whether gambling operators based overseas require an operating licence from the Gambling Commission to serve customers based in Great Britain. Under the licensing regime, operators need to obtain an operating licence from the Commission if any customers are in Great Britain at the time of placing their bets or wagers. Where those customers usually live is irrelevant to the licensing regime.
The third condition that determines whether a bet is a 'general bet' and subject to the 15% duty is where "the person who makes the bet as principal is a body corporate not legally constituted in the United Kingdom, [and] the bookmaker with whom the bet is made knows or has reasonable cause to believe that at least one potential beneficiary of any winnings from the bet is a UK person, and [providing] the bet is not an excluded bet".
An 'excluded bet' is a bet that is "not made in or from the United Kingdom, and the facilities used to receive or negotiate the bet or (in the case of pool betting) to conduct the pool betting operations are not capable of being used in or from the United Kingdom".
Under the Bill, the remote gaming duty applies to an operator's profits made from games of chance for a prize played over the internet, via telephone, TV, radio or "any other kind of electronic or other technology for facilitating communication" by a "chargeable person and another person".
The government has resisted calls from the industry to reduce the rate to no more than 10%.
A 'chargeable person' is defined as either "any UK person" or "any body corporate not legally constituted in the United Kingdom if the person with whom the arrangements [for remote gaming] are made knows, or has reasonable cause to believe, that at least one potential beneficiary of any prizes from remote gaming under the arrangements is a UK person".
The new duties are expected to be levied from 1 December 2014.
Gambling law expert Susan Biddle of Pinsent Masons, the law firm behind Out-Law.com, said: "There have been concerns within industry and from commentators that a 15% tax rate on remote gambling would encourage a black market. The concerns have been based on a fear that better odds may be offered by those who evade these taxes and the new licensing requirements."
"Another concern has been that a 15% tax rate will result in less competition due to consolidation in the market over the next few years. This consolidation, they claim, would be prompted by some of the smaller operators being unable to cope with the additional costs they will face under the new tax and regulatory regimes. Only time will tell whether the new point of consumption basis for tax and regulation will have the intended consequences of raising revenue and improving consumer protection, or the unintended consequences of a larger black market and less market competition," she said.