David Clifton – Licensing Expert – The Betting Right: How did we get here & where are we going?

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David Clifton

In his Budget announcement on 18 March 2015, the Chancellor of the Exchequer George Osborne announced the Government’s intention to replace the Horserace Betting Levy with a new Horserace Betting Right administered directly by the racing industry that will apply to all bookmakers wherever they are located.

This has been a long-running saga. In 2000, the then Government stated its intention “to abolish the statutory levy on horserace betting, on the basis that commercial agreements between horseracing and other industries, including bookmaking, are capable of producing sufficient income for racing to flourish as a national sport without the need for such a levy”.

More recently, the G​ambling (Licensing and Advertising) Act 2014 conferred a power on the Secretary of State to extend the current Levy arrangements to offshore remote betting operators by way of secondary legislation. The Government subsequently ran an 8-week technical consultation from June to August 2014 on implementing that extension.

This was followed by a consultation on modernisation of the Horserace Betting Levy, conducted between August and November 2014, in which the Department for Culture Media and Sport (“DCMS”) sought views on two options:

  1. reforming the existing Horserace Betting Levy (currently collected by the Horserace Betting Levy Board from the gross profits of betting on British horseracing) and
  2. replacing the Levy with a bespoke statutory framework.

DCMS made it clear that it had no preference for one option over the other and that it was particularly seeking views from those within the horseracing and betting industries, including offshore remote betting operators taking bets on British horseracing who were for the first time required to obtain operating licences from the Gambling Commission pursuant to the 2014 Act.

This second consultation was intended to play a key part in determining what would be the best statutory funding mechanism:

  • to support the common interests of the betting industry and the sport of horseracing
  • that is fair, sustainable, enforceable and legally sound and
  • will remove the Government as far as possible from involvement in the affairs of betting and racing.

It proceeded on the assumption that there was a continuing need for a statutory framework to underpin arrangements enabling a flow of funding from betting on British horseracing back into the sport for the mutual benefit of both racing and betting. DCMS said that this was because a statutory framework can ensure that all those who benefit from betting on the horseracing “product” contribute and that there are no “free-riders”.

However, it transpires that respondents to the second consultation frequently stated that they needed to see more detail in relation to the replacement statutory framework in order to comment more fully. Accordingly, following on from this, a third consultation ran from 5 February to 12 March 2015, this time on a possible Horserace Betting Right.

This last consultation’s stated purpose was to produce “a modern, viable levy system which is fair and extends to all bookmakers equally” and that is “future-proofed so that it can adapt to developments in the betting and racing industries, and provide certainty to enable both betting and racing to plan ahead”.

On this occasion, the Government’s position was made clear, the consultation document stating that the Levy “is now manifestly unfair with a substantially increased proportion of betting now with offshore remote operators who benefit from racing’s efforts to make the sport attractive to betting customers without making a financial contribution to those efforts”.

Nevertheless, DCMS was keen to stress that, despite the fact that this final consultation only covered a Horserace Betting Right, that did not mean that a decision had already been taken to implement such a model but “simply reflects the fact that it needs further discussion”.

There will be those who might query that statement, bearing in mind that the Chancellor’s announcement of the intention to introduce the new Betting Right occurred just six days following the closing date of the consultation period.

A full and detailed response to all three consultations is awaited and its complexion may well depend on the outcome of the forthcoming General Election, but the die has been cast and, in political terms, a U-turn is very unlikely, notwithstanding criticism by the Association of British Bookmakers that the proposed Betting Right is  “unworkable and the detail will derail it, leaving racing seriously underfunded for a considerable length of time”.

The ABB’s position was diametrically opposed to that of the British Horseracing Authority who welcomed the new Betting Right as a “tremendous boost for the tens of thousands of people across the country that derive their livelihoods from our sport”.

All we know at the moment is that it is likely that under the new scheme:

  • a right to authorise the taking of bets on British Horseracing would be created with the consequence that it would be unlawful for a betting provider ​to offer a betting service on British racing to customers in Great Britain without gaining an authorisation
  • a racing authority would establish and publish authorisation schemes setting out terms and conditions and authorisation fees (that would have to be used for defined purposes) and would be required to demonstrate that it has collected and used authorisation fees appropriately
  • a tribunal would handle dispute resolution and make binding determinations on issues of disagreement between the racing authority and betting providers, with the Government taking the view that “robust enforcement mechanisms would be central to any Horserace Betting Right’s success”.

What is clear is that there will be continuing controversy and concern about the tax consequences of the intended change. Because the new Betting Right is intended to be “directly administered by the racing industry”, this could mean that it would no longer constitute a statutory levy and hence could be liable to VAT that would not be recoverable by betting operators, despite the Government’s view that payments made under the authorisation scheme would be unlikely to attract VAT.

We will report more news when we have it.

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David Clifton Director Clifton Davies

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