Free bets tax suffers UK purdah delay

Free bets tax suffers UK purdah delay

Wednesday, May 3, 2017 Posted by James Walker
Measure is dropped from UK finance bill

The UK Treasury has confirmed that the passing of new rules regarding the extension of the point of consumption (PoC) tax regime to online casino and bingo bonuses will be delayed until after the election, as parliament will not have enough time to debate the measure before it enters the pre-election recess.

It is the second piece of legislation or government proposal affecting the UK gambling industry to be delayed by Prime Minister Theresa May’s surprise announcement of the snap election set for June 8 after the announcement a week back of a further postponement of the government’s proposals for the triennial review.

Both decision were made under the so-called purdah rules, by which the government suspends enacting policy decisions during the election campaign. Gavin West, head of VAT and indirect taxes at Smith Cooper and a director at Ampla Consulting, noted that the government had removed a number of clauses from Finance Bill 2017 in advance of it receiving Royal Assent including the one relating to the taxing of free-plays for remote gaming duty (RGD) purposes.

He said the government and the opposition parties had been negotiating which clauses should be debated in the very limited time before parliament is dissolved and the free-plays clause did not make the cut.

It provides some minor relief for operators which were expecting the measure to come into force in August. However, West added that the UK Treasury has advised there has been no change in policy.

“They expect the provisions which have been cut to make a significant contribution to public finances and anticipate that government will legislate for these clauses at the earliest opportunity at the start of the new parliament.”

Indeed, West suggested that Her Majesty’s Revenue and Customs (HMRC) was still expecting the free-plays measure to be implemented as planned from August 1.

The news of the free-bets clause delay follows on from the postponing of the triennial review proposals that was announced by the DCMS soon after the election was called.

Simon French, analyst at Cenkos, noted the omission of the clause from the final reading of the finance bill but said the delay – if there were to be one – would have very little impact on his forecasts for the operators that will be affected.

French, who is speaking alongside Simon Davies from Canaccord Genuity, Ivor Jones from Peel Hunt and Ed Birkin director at independent consultancy Ignite Research, at the SBC Betting on Football event in London this week, said that the measure represents a £5m-£10m annualised hit to the major operators.

He added that should the measure fail to be implemented in August, it might mean the current revenue expectations for the major firms more were more likely to be met. However, he cautioned against thinking this signalled any form of change of stance from the government with regard to its view of the gambling industry.

“We do not believe this signals any change in stance in government's view towards the gambling industry and we continue to favour online-focused operators with proprietary technology and geographic diversity,” he said.

Likely to have more of a short-term impact is the delay to the triennial review proposals with analysts speculating that the uncertainties around the fate of gaming machine states and prizes and the advertising of gambling on TV are one possible blockage to the anticipated further consolidation in the sector. Davies at Canaccord Genuity said at the start of this month that William Hill would be an “obvious target” in any further M&A but only post- a DCMS announcement.

The impediment for any acquirer of any operator with UK land-based betting shop exposure is the extent to which that sector will be hit by any potential cut in maximum stakes on B2 machines. But analysts at Morgan Stanley predicted in a note in published last week that once the election was out of the way, the review obstacle would soon be removed. “The publication of the UK government’s Triennial Review could well open the spigot as the regulatory outlook becomes clearer,” they wrote.

Totally Gaming says: As with the triennial review, the temporary delay to the imposition of remote gaming duty on free bets and bonuses represents a temporary hiccup for the government. However, with the triennial review, it is evident the analysts are seeing through whatever bad news might be due there and are eyeing up the possibility of more large-scale M&A for later this year.

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