Levy reform (again)

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

Following its teaserdetails two weeks ago, the Government yesterday set out more regarding its proposed reform of the Horserace Betting Levy. This certainly puts some flesh on the bones but it also leaves many issues relating to the proposed reform unanswered, including most importantly whether it is legally possible, as envisaged.

We have often recounted the long and tortuous history of proposed reform of the Levy (for example here and here). In short, from time to time, successive governments have become seized of the notion to put the Levy on a more modern footing, only to find the various issues too complex and difficult, and for the reforms to go nowhere. Will this time be any different?

The proposal was flagged yesterday in the Budget Red Book (paragraph 2.158) – although not mentioned in the Budget speech - and then (some) greater detail was provided in a document issued by the Department for Culture Media and Sport entitled “Implementing the replacement for the Horserace Betting Levy”. The document sets out (somewhat sparsely, the description runs to just four pages) the new proposed scheme for the Levy. The essential aspects appear to be as follows.

• The scheme will remain as a levy imposed on gambling operators taking bets on British horseracing (as opposed to say the establishment of a so-called betting right, which was floated by the Government last year but now apparently abandoned, or indeed the abolition of the Levy altogether).
• The obligation to pay the Levy will be extended to gambling operators located outside Great Britain.
• The current system of on-course operators paying a de minimis flat fee per year may be “factor[ed].. into the new arrangements”.
• The administration of the Levy will be reformed with the Levy Board retained solely to collect the Levy with the other existing functions of the Board - that is setting the Levy rates and the distribution of funds - dealt with elsewhere. The latter function, the distribution of funds is to be undertaken by “a racing authority”.

It is said that these changes will be achieved by secondary legislation made under section 2 of the Gambling (Licensing and Advertising) Act 2014.

The Government recognises the need to obtain state aid clearance from the European Commission for these proposals. It sets out a timetable with the state aid notification process taking place over the summer, the Statutory Instrument and full impact assessment published towards the end of the year and the new funding model coming into force in April of 2017.

Among the things not addressed in the four pages in the document are the following.

• The need and/or justification of any levy or funding for Racing in light of the revenue it now receives in terms of the sale of media rights.
• Who will set the terms of the Levy each year – or if (as seems likely) it is envisaged that there will be a fixed levy without amendment each year, what these fixed terms are to be.
• How will the Levy be effectively enforced against gambling operators overseas.
• Whether the Levy will be assessed only on bets made by UK punters or whether it will be assessed by punters worldwide on British horseracing.
• The identity of the “racing authority” which will get to make the “decisions on spend” of the Levy revenue.
• The Government’s views on the various difficult legal issues which arise in respect of its proposals (which will be the subject of a separate post).

The document refers to a further consultation in “Spring 2016” regarding these proposals although it does not seem that that consultation has kicked off yet. It may be that the Government will produce a more detailed document to accompany that consultation which may begin to answer some of these issues and provide details of the independent report on the funding of horseracing due later this month. In the meantime, we begin to speculate as to the legal obstacles facing these proposals.