Disappointing result for the online gaming industry as Remote Gaming Duty rate increases from 15% to 21% from 1 October 2019

As previously reported on Law-Now (see here), the Government announced in May 2018 that the maximum stakes on Fixed Odds Betting Terminals (“FOBTs”) are to be reduced from £100 to £2. The Government stated at the time that the rate of Remote Gaming Duty (“RGD”) would be increased from its current level of 15% to mitigate the negative impact on public finances arising from this change (presumably through reduced takings of Machine Games Duty (“MGD”) from FOBTs). The increased rate of RGD was not confirmed in this press release but was hoped by many to be no more than 20%.

Disappointingly, Monday’s Budget has confirmed that the rate will be increased to 21% from 1 October 2019; although, given that some commentators had mooted the rate being even higher and the start date being sooner, this outcome is perhaps better than it might have been. The 6 percentage point increaseis despite calls from the online gaming industry to limit the RGD increase to a lower rate, on the basis that online gaming operators are already having to manage a hit on profit margins from their UK gaming operations due to amendments in the last few years resulting in RGD being operated on a point of consumption basis and the use of “freeplays” becoming dutiable. The rate increase to 21% may result in some online gaming operators choosing to reallocate their resources towards driving growth in other more favourable markets, in which case the rate rise could ultimately backfire on the Treasury.

Interestingly, the Government has only increased the rates of RGD, rather than choosing to increase all of the ‘point of consumption’ duties (being RGD, General Betting Duty (“GBD”) and Pool Betting Duty (“PBD”)), each of which are currently levied at the same rate of 15%,

HMRC’s statistics show that GBD (£572m), PBD (£5m) and RGD (£443m) raised just over £1.02bn in the financial year 2017/8, while MGD raised £712m, with receipts from betting and games duties collectively raising £2.86bn. We suspect that the Government has only increased rates of RGD (as opposed to GBD and PBD) to avoid the burden of the “double whammy” falling squarely on high street bookmakers, especially given the warnings from the industry of shop closures and job losses. Unlike GBD and PBD (which apply to bets, whether those bets are made in person or online), RGD is only chargeable on online gaming and hence primarily falls on online gaming websites rather than high street bookmakers.

The reasonably material disparity between GBD and PBD (at 15%) and RGD (at 21%) may lead to a skewing towards online gambling operators favouring betting rather than gaming products offered to UK players going forwards. Time will tell whether the ultimate cost of this policy change will be borne by the Treasury through a significant reduction in RGD collections. It is certainly difficult at this stage to see the Exchequer receiving the anticipated increase in revenues set out in the policy paper released on Monday (£130m for 2019/2020 increasing to an additional £290m in 2023/24).