For years, the UK maintained one of the most progressive regulatory frameworks for online gaming in the world. But that is poised to change in 2014.
The Gambling Act 2005 modernized regulations the UK gaming industry. It created the UK Gambling Commission, a regulatory body with the authority to license and regulate gambling. The Gambling Commission began accepting applications for licenses on January 2, 2006, and began awarding them in September 2007.
The 2005 Act also gave the European Economic Area (EEA) and other "white listed" countries unfettered access to the UK market. White listed countries outside the EEA include: Alderney, Antigua and Barbuda, Gibraltar, Isle of Man, and Tasmania. The promotion of international online gambling in the UK from countries other than the UK, the EEA, and the “white list” is not allowed.
In addition to being able to operate from a white listed jurisdiction, online gaming operators were also able to enjoy the tax benefits of those jurisdictions as well.
But in 2014, the UK is expected to require operators to obtain UK licenses and implement a 15% point of consumption tax. That means for all wagers placed in the UK, operators would have to pay a 15% tax on gross profits. This tax rate is in line with the current tax rate for online gaming operators licensed by the UK.
Currently, many of the big operators in the UK operate offshore, where they face a tax of 1%. A 15% tax on gross profits has the potential to significantly eat into overall profits.
Online gaming in the UK is defined as gambling in which people participate by using "remote communication such as the Internet, telephone, television, radio, and any other kind of electronic or other technology for facilitating communication." The UK’s objective with its licensing structure is to prevent problem gambling, ensure that online gambling is fair, and protect children and other vulnerable people from the harms of gambling.
Operators may locate their facilities in the country and offer all types of online gaming including poker, sports and race betting, casino games, and online slots, abiding by the remote and gambling software technical standards as outlined by the Gambling Commission.
There are six types of online gambling operating licenses operators may apply for: a casino operating license, a bingo operating license, a general betting operating license, a pool betting operating license, a betting intermediary operating license, or a lottery operating license. Operators who wish to operate more than one type need only apply for one betting license type.
To apply for an operating license, applicants must pay an application fee and an annual fee once the operating license is granted. Both the application fees and annual operating fees are based on the type of license and are on a sliding scale based on gross gambling yield.
According to the 2009/2010 Gambling Commission Industry Statistics, the number of licensed operators increased from 366 in 2009 to 432 in 2010. The Commission attributes the increase to society lottery operators obtaining licenses. The amount wagered on online gaming activities, excluding betting exchanges, was about £11,000 million.
The Gambling Act 2005 includes many conditions concerning problem gambling and requires online gambling licensees to establish policies for promoting socially responsible gambling. These policies must be published and explain how the operator will contribute to the research into the prevention and treatment of problem gambling, to public education on the risks and safety of gambling, and to identification of problem gamblers. Operators must also clearly state on their website where players may seek help for problem gambling. Employers of online gambling operators must ensure their employees are properly trained in identifying problem gambling and have procedures in place for addressing customers on this matter. Online gambling operators must also give their players the ability to exclude themselves from their services and advertisers must comply with the advertising codes of practice to not promote irresponsible gambling behavior, including underage gambling.
Online gaming is taxed at a rate of 15% of the operator’s gross profit. For a betting exchange, poker site, or pool/pari-mutuel operator, the tax rate is 15% of the operator’s commission.
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