Levy rolls on - at least for one more year

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

In our last update we speculated at to whether the Levy might be referred for determination by the Government for an unprecedented second year in a row. In the end, with just a few hours remaining before automatic referral to the Government, a new scheme was agreed.

The 48th Levy Scheme (which will apply from 1 April 2009 to 31 March 2010) is, in large part, a continuation of the previous year's scheme. The Levy continues to be at the rate of 10% of bookmakers' gross win from bets on British horseracing subject to the following changes:

(i) the threshold above which smaller bookmaking businesses have to pay the full 10% is increased from £85,700 to £90,000;

(ii) the minimum guaranteed payment has been removed;

(iii) there has also been a change in the basis on which on-course bookmakers are charged.

The bookmakers had been arguing that now that the High Court has confirmed the validity of Turf TV's structure, the Levy should be reduced significantly to take account of bookmakers' increased costs in taking both the Turf TV and SIS services. No such reduction was agreed but, instead, it was agreed to add further race meetings and races at times suited to the betting shop programme of televised events.

In late September the independent members of the Levy Board had engaged a retired Court of Appeal judge, Sir Philip Otton, to assist in the process. Sir Philip, who is an experienced arbitrator, gave his views on the various contentious issues to the interested parties and then acted as a mediator in the final period leading up to the 31 October deadline.

One of the other points on which agreement was reached is that the Levy Board will now take responsibility for completing the process of reviewing and modernising the Levy set in train by the Sports Minister, Gerry Sutcliffe, in February of this year. The Levy Board has committed to submit its report to the Government by 30 April 2009 and Sir Philip Otton will continue to be retained by the Levy Board for his advice.

Despite agreement being reached on 31 October, there are clearly unresolved issues between the betting and racing industries. The Racing Post reported earlier this month on the contentious issue of whether bookmakers' earnings from FOBTs (the very profitable gaming machines located in most betting shops – click here for a separate piece on FOBTs in this update) should be taken into account in determining the amount of Levy. A William Hill spokesman was quoted as saying: "There's no justification for racing to receive any revenue from any other products. In fact, legally, racing can only receive its income from its own product. As it wishes to move from the levy to a commercial relationship, what other industry has a commercial relationship where you get paid for products you don't supply?". This statement appears to misunderstand the position adopted by racing, which is not that bookmakers should be obliged to pay to racing a percentage of their profits from FOBTs; rather, we understand racing's contention to be that, in determining the amount of the Levy, bookmakers' profits from FOBTs should be taken into account – particularly if it can be shown that it is horseracing which encourages many FOBT–players into the betting shops in the first place.