The Impact of Taxing Freeplays in the UK
Posted by Harry Kane on Sunday, August 13, 2017
Let’s be honest, who doesn’t love freeplays?
A key part of the promotional measures used by online casino brands to target new players and reward existing customers, freeplays have become an important driver of a truly impressive growth industry in recent times.
As of August 1st, however, a new tax has been imposed on freeplays that will change the way in which they are perceived by authorities and operators alike. In this post, we will look at the impact of this and ask what it means for the industry and the UK economy.
How Will the New Tax Levy Work?
The proposal, which was initially discarded from the HM Revenue and Customs (HMRC) Finance Bill for 2017, has been designed to bring freeplays in line with how other complimentary wagers are treated as part of the General Betting Duty. Generic free bets have been taxed under this guideline for a while now, so HMRC have taken the logical step of including any revenue generated by freeplays when calculating how much annual Remote Gaming Duty operators are required to play.
This is a significant change in the status quo, as freeplays were previously considered as promotional bonuses that were not eligible to be taxed directly.
While delays caused the general election and Parliament’s summer recess means that the new legislation has not yet officially been passed into law, the amended Remote Gaming Duty will be backdated to August 1st and applied retroactively. The announcement has caused some ripples among UK operators, who have had to adapt quickly to their new tax burden that adds to the 15% Point of Consumption tax that was initially enacted in December 2014.
What Impact Will the New Tax Levy Have?
The decision to tax freeplays should not come as a surprise, particularly given their popularity, eligibility across a wide range of games and the amount of revenue they generate. From an economic perspective, the UK government’s initial estimates suggest that the new tax levy could generate an impressive £345 million between 2017 and 2021, and this reflects the core benefit of legalising and regulating online gambling in the digital age.
Such revenue may also prove crucial in a post-Brexit landscape, particularly if the UK is required to pay a hefty divorce bill to expedite trade talks with the EU. This may even explain why the legislation was rushed through and tacked onto the HMRC Finance Bill for 2017, with the UK poised to take an economic hit over the course of the next few years at least.
From an operator viewpoint, the move is likely to create a period of confusion and disruption as they determine the best way to manage the additional burden. It is likely that players may ultimately bear at least some of the cost, as while freeplays are likely to remain in place their typical value may be reduced over time. This seems to be the most logical way of maintaining freeplays while also enabling brands to maintain their profitability, but we should definitely watch this space in the weeks to come.