In our latest blog we look at the relationship between gambling and taxation.
The gambling industry has grown significantly in the past few years, reaping massive profits for betting firms across the UK. The industry alone is responsible for a significant proportion of gross domestic product and generates a hefty amount of tax revenue for the HMRC.
Betting companies are required to pay either a General Betting Duty (GBD) or Pool Betting Duty (PBD) depending on the type of service they offer. These taxes are charged as a percentage of any profit made at a rate of 15%, meaning that the more the bookies win, the more money is received by the government.
New laws passed in 2014 were also tightened to prevent offshore casino groups, based in places such as Gibraltar and the Isle of Mann, from tax exemption status. This new Point of Consumption Tax means that online casinos that offer games to UK customers are now liable for tax at the point of consumption. This Remote Gaming Duty (RGD) is set again at 15%.
However, for average and professional punters alike, any tax liability is waivered by the HMRC and any profits earned from gambling are not tax deductible. The official government line is that, even if a gambler has a successful betting system that consistently makes money, it still cannot be considered a trade.
The ruling comes from the fact that an outcome of any sporting event cannot be predicted with 100% accuracy each and every time. Thus, it should not be treated as a reliable way to make money and taxed as so.
Even if the punter is highly knowledgeable about a sporting field, studies the form meticulously or has a predetermined system in place, this is still not enough to classify gambling as a professional trade. Likewise, it is very difficult to determine the difference between vocational gamblers and ‘professionals’.
Another logical reason for why the government cannot tax gambling winnings is the fact that they’d have to then provide tax relief for losing bets too. This system would be unworkable and the costs astronomical.
In addition, any taxation law on gambling profits would be unfeasible for the government to enforce. For example, if a punter were to win £70 via an online sports bet, the chances of them voluntarily paying the correct amount of tax on those winnings, as opposed to staking it again on another bet, is unrealistic.
Gambling and Taxation in the UK: A summary
Although it’s not advisable to give up the day job to start a professional gambling career, punters should feel safe in the knowledge that any winnings they receive from gambling in the UK are not tax deductible are always likely to remain so.
For more information on the rules around gambling and taxation in the UK or for accountancy services in East London, do get in touch.