UK: Brexit: Potential indirect tax issues for online gambling

With less than a year until the United Kingdom leaves the European Union, Gavin West, Director at tax consultancy Ampla Consulting, considers what this could mean for the online gambling industry from a VAT and gaming tax perspective. Whilst the recent transition agreement could see certain Brexit-related indirect tax issues postponed until 1 January 2021 this is more likely to relate to goods rather than services. Gavin explains why Brexit could provide online gambling operators with an incentive to revisit their business structures to mitigate any potential risks which may arise following the UK's exit from the EU.

What do we know so far?

As readers are no doubt aware, on 29 March 2017 the UK Government triggered Article 50, beginning the formal process for the UK to leave the EU on 29 March 2019. There remains much uncertainty as to what the landscape will look like from a VAT and Customs Union perspective post leaving. This is being addressed, albeit slowly. In late March 2018 EU leaders signed off a political agreement on a transition period allowing a 21 month period ending 31 December 2020, during which the UK will remain part of the single market and Customs Union. In addition, the UK Government has published the Taxation (Cross-border Trade) Bill 2017-19 which will allow it to establish a standalone customs regime and ensure that VAT and Excise legislation operates effectively once the UK leaves the EU.

No actions are currently required then...

It should be noted that the transition period agreement still needs to be ratified by the EU and UK Parliaments, which will not happen until October 2018 at the earliest. The Taxation Bill is high-level and whilst it paves the way for a UK VAT regime outside of the EU, further statutory instruments will be required to deal with associated indirect tax practicalities which businesses will face.

It is also important to note that the current focus of discussion relates to the importation of goods from other EU Member States, in particular the cash flow disadvantage which many small businesses may face as they are required to account for and pay import VAT at the time goods enter the UK but cannot recover this cost until the end of a VAT reporting period. Where UK-established online gambling operators currently acquire hardware or other goods from EU suppliers this may be an issue. However, based on the demographics of the industry and the physical location of operators' platforms, this issue is likely to be of little relevance or significance.

Online gambling is a services industry. Whilst the VAT and Excise Duty position will affect the treatment of goods being supplied between the EU and the UK this should not extend to services. The place of supply of services for VAT purposes will not change following Brexit as the current rules already cover businesses located outside of the EU. For online gambling operators this will mean that B2C supplies continue to be taxed at the place of consumption, the jurisdiction where the customer is located.

The UK leaving the EU will also not affect current gaming taxes which are levied on a point of consumption basis. Gaming taxes are governed by national legislation. They are not subject to any EU Directives.

Taking the above into consideration then, what if any are the issues arising for the industry?

Possible issues around VAT reporting

Betting and gaming activities are in the main VAT exempt. However, this is not the case in all EU Member States. Readers are no doubt aware of the longstanding indirect tax issues in the larger markets such as Germany and Ireland where certain activities are subject to VAT instead of gaming taxes. Careful consideration also needs to be given to the VAT position where operators have customers located in other Member States including Finland, Greece, Croatia and Luxembourg.

It does not matter where an online gambling operator is established, the VAT place of supply rules for B2C electronically supplied services (such as betting and gaming), state that the services are supplied where the customer is located. This gives an online gambling operator a liability to register for and account for VAT in each of the affected EU Member States where it accepts bets, stakes or par fees depending on the game supplied. This applies on all income received; there is no minimum VAT registration threshold for the supply of electronic services across borders.

Currently there is a simplification measure known as the MOSS (the 'Mini One Stop Shop') which provides businesses within the EU with the ability to simplify their VAT reporting requirements for electronically supplied B2C services. The MOSS allows online gambling operators to avoid having to register for VAT in each and every Member State where they operate. The MOSS runs alongside the business' EU VAT registration allowing the operator to report all activities on a Member State by Member State basis on a single quarterly return and to make a single payment of VAT for all supplies to the tax authorities in the Member State in which it is registered.

The business is already registered under the MOSS - so it can simply continue with this...

A potential issue could occur, post-Brexit, where an online gambling operator is currently registered for the MOSS in the UK. Although the MOSS scheme extends to operators located outside of the EU there are different rules and criteria. UK-registered operators will no longer be governed by the Union Scheme, instead they would move to the non-Union Scheme with effect from 30 March 2019. So what is the issue?

Affected online gambling operators would be required to register for VAT in a jurisdiction in which they have no establishment. If an operator does have an establishment in an EU Member State then any decision process is taken away from it and it would be required to register for VAT and the MOSS there. Where no establishment exists the operator would be able to choose in which Member State it wishes to register in. This however could also create issues as in certain countries non-established taxable persons may be required to use local agents.

Based on the above the best outcome for affected operators would be additional administrative requirements as opposed to the worst case scenario which could be an absolute cost to online gambling operators of engaging with a locally established agent. The alternative of registering for VAT in each Member State where customers are located would not appear to be a viable option.

Turning issues into opportunities

Brexit could provide online gambling operators with an incentive to undertake a review of their current and future indirect tax reporting requirements and liabilities to VAT and/or gaming taxes. The environment is fast moving and ever changing. Getting it wrong can create absolute tax costs and inefficiencies in reporting processes and procedures, resulting in additional resource requirements and unnecessary administrative burdens.

There may be online gambling operators who are unaware that they have a liability to VAT in certain Member States. Operators may not for example have a significant customer base in countries such as Croatia or Finland. However, although the VAT at stake may not be significant, other issues may arise. In addition to the potential for penalties and interest charges, the relevant Member State's government may take any non-compliance of taxes into account when issuing licences and reviewing licence conditions and codes of practice for potential breaches. This may especially be the case in EU markets that are considering implementing regulation.

Are there any other points to consider?

It may be prudent for online gambling operators to consider the potential regulatory issues that Brexit could cause. For example, where a UK operator has been allowed a licence in another Member State by virtue of it being established in the EU, could this change? What happens upon applying to renew the licence? Could it be the case that going forward the operator is required to establish itself in that jurisdiction or partner with a local entity? Are agents required for the filing and paying of any gaming tax liabilities?

Depending on the answers to the above, online gambling operators may seek to ensure that they are established in an EU Member State post-Brexit. It is certainly a point worth considering. Taxation follows regulation and the prudent online gambling operator may want to combine a regulatory review of its operational structure when undertaking any analysis from a taxation perspective. Continuation of supply is critical in this industry and operators should at least ensure that they are aware of all potential issues that may arise as a result of Brexit.

Authored by:

Gavin West Director
Ampla Consulting, UK
Online Gambling Lawyer (Cecileparkmedia)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Smith & Williamson
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Smith & Williamson
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions