The UK Treasury is being advised that it still “has a way to go” in understanding the complexities of the country’s gambling industry as it prepares to deliver its latest budget.
Stephen Hignett, Co-Head of Tax at CMS, said the Treasury’s pre-budget work — including engagement with industry leaders and think tanks — has revealed misconceptions that continue to shape its assumptions.
One of the biggest concerns raised by officials relates to the proportion of UK-facing gambling operators that continue to base their businesses offshore in hubs such as Malta and Gibraltar.
Offshore Structures Rooted in Industry History
During a Select Committee session in October, MPs questioned Betting & Gaming Council CEO Grainne Hurst and Tax Committee Chair Stephen Hodgson about why offshore structures remain so common.
Some committee members suggested operators were maintaining these structures solely to avoid corporation tax, but Hignett stressed that the reality is more complicated.
“There’s a history as to why different parts of the industry are offshore and some are onshore, which needs to be understood to sort of realise how we got here,” he says.
“They’re there for reasons that are well explained,” he adds.
Hignett noted that operators have shifted between offshore and onshore jurisdictions for decades, often to stay competitive with rivals.
Regulatory Shifts Played Major Role
Hignett pointed out that the landscape was shaped significantly by the fact that remote gambling in the UK was illegal until the Gambling Act of 2005 came into force in 2007.
During this period, online and mobile betting were rapidly gaining popularity across Europe, making offshore licensing far more attractive.
“If you’re an operator in 2007, the question is ‘Why would you come onshore voluntarily, when all of your competitors remain offshore?’ You’re volunteering to pay a whole load of taxes that’s just going to put you at a massive competitive disadvantage,” he says.
He added that even UK courts acknowledged the logic behind that decision, noting that “we kind of understand why you went offshore, because everyone else had gone offshore, and therefore you would be the only people paying duty in the UK when the rules were like that.”
Consultation Revealed Industry Concerns
Hignett said the Treasury’s understanding of the sector has improved since launching its gambling tax consultation in April, but he believes more work is still needed.
The consultation sought feedback on the existing three-rate tax structure and suggested merging the rates into a single one across all verticals.
Operators widely opposed the idea because it would raise general betting duty from 15% to 21%, in line with the Remote Gaming Duty applied to online casino.
Industry leaders warned that such a move would put retail betting and horse racing — both already under financial pressure — at severe risk.
Debate Shifts Toward Taxing High-Risk Verticals
In subsequent discussions, some think tanks suggested raising remote gaming duty to 50% or increasing machine games duty.
The Treasury’s most recent report recommended that the government consider increasing taxes on “high-risk” products such as online casino.
“I think they are on a journey and I think they’ve probably got a way to go, because what we’re looking at is a very complex ecosystem,” Hignett said.
He noted that the committee’s questioning focused more on regulatory issues and social harm than tax structure, saying, “That’s why it’s regulated, to try and make sure we can control that.”
When Tax Changes Could Take Effect
Hignett said the chancellor has two main options for implementing any changes announced in the budget.
“She will either bring them into effect from midnight of Budget Day or from the beginning of the next financial year,” he said.
He added that transactional taxes often take effect immediately, whereas rate changes for gambling duties typically start from the new financial year.
He highlighted the 2019 rise in Remote Gaming Duty from 15% to 21% as an example of changes taking effect on 1 April.
