Betfair jumps ship to slash tax bill

09/03/2011

Betfair is to follow rival gambling groups by moving part of its business Gibraltar to slash its tax bill.

The world’s largest betting exchange, which lets punters set odds and bet directly with each other, said the decision to stop operating under a UK gaming licence and to consolidate some of its technology in Gibraltar would save £20million a year. The shares rose 67½p to 955p.

Other betting firms including Ladbrokes and William Hill have already made the move to escape the UK’s 15 per cent tax on gross gambling profits. Gibraltar’s rate is around 1 per cent. “We are not a leader, we are a follower,” said Betfair chief executive David Yu. “We will be headquartered here, we will pay UK corporation tax and voluntarily contribute to the UK horse racing levy.”

However, within weeks the Department for Culture, Media and Sport is to announce the long-awaited results of its consultation into regulating remote gaming – offered through the internet, phones and fax. It is expected to announce that in line with other European countries, every offshore gaming company must get a British-specific licence on top of the one it will already have from the country where it operates.

But alarm bells are ringing as many see this as the first step towards changing the tax regime covering offshore companies.”People are assuming that the licensing regulation will lead to changes in taxation,’ said one industry source. It’s the thin end of a taxation wedge. At the moment, offshore gambling operators pay next to nothing in tax, which is why they went offshore in the first place. But there is an expectation that the rate could be put up to match the 15 per cent which UK-based operators currently pay. We’d be amazed if the Treasury wasn’t already looking at this.”

It is believed that the Government is waiting to make this announcement on the online sector before confirming the changes to B3 specifications.

Betfair currently employs 1,200 in UK and their jobs will be unaffected. In a trading update, Betfair said revenues had risen by 6.2 per cent to £77million for the third quarter to January. The company has enjoyed strong growth in football betting, buoyed by the most open Premiership for years. It has also been boosted by the cricket World Cup.

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