William Hill and Ladbrokes Hit Hard by New Online Gambling Tax

William Hill Ladbrokes UK Gambling Tax

William Hill said its operating profits fell by around £21 million in the first half of the year, due to increased online gambling and FOBT taxation. (Image: William Hill)

William Hill and Ladbrokes, Britain’s two biggest bookmakers, have reported sliding financial results this week, as increased online gambling taxes begin to kick in. Both William Hill and Ladbrokes have said the UK’s new “point of consumption tax” has hit them hard, along with a bigger duty on fixed-odds betting terminals (FOBTs).

The new tax regime was established at the beginning of this year, following the implementation of the UK Gambling Act, and requires online operators with exposure to the UK market to be licensed and regulated within the UK, and to pay a 15 percent levy on gross gaming revenues.

Under the regulations of the previous regime, online operators were able to target UK customers while being licensed by a series of overseas jurisdictions that had been “whitelisted” by the UK government and offered big tax breaks.

Some operators chose to quit the UK in the wake of the new laws, but most stayed, believing that the pros of operating in a highly lucrative market outweighed the cons of the new tax, but all are now feeling the pinch.

Tax Bill £44 Million Higher than Last Year

Meanwhile, following pressure from anti-gambling groups, the government raised the tax duty on controversial FOBTs terminals in high-street bookies from 20 to 25 per cent, hitting the bookies even harder.

FOBTs allow customers to wager up to £100 per spin on virtual casino games like roulette. Detractors argue that the stakes are simply too high and they have promoted a resurgence in problem gambling since their introduction to Britain’s bookmakers’ shops in 2005.

William Hill said its operating profits fell by around £21 million in the first half of the year, and that the new fiscal laws had left it with a tax bill that was £44 million higher than last year.

Ladbrokes, meanwhile, which a few weeks ago announced a £2.3 billion merger with Gala Coral that will see it overtake William Hill as Britain’s biggest High Street bookmaker, reported a £51.4 million loss for the first half of 2015, following dozens of shop closures in the UK and Ireland.

Ladbrokes’ chief executive, Jim Mullen, who was poached from William Hill to shore up the company’s online operations, said “short-term thinking” which had “come to dominate Ladbrokes’ actions” was to blame for the losses.

Mobile Now UK Favourite Internet Device

There were, however, reasons to be optimistic beyond the upcoming merger. Ladbrokes’ online operations, which had fallen way behind William Hill’s over the past few years, enjoyed a 6.9 per cent rise for the period, suggesting Mullen has been well-appointed.

Both operators may also take heart from news this week of a study by Ofcom, which suggests mobile phones are now the number one method of accessing the internet for Brits.

Thirty-three percent of us now prefer to use our phones to access the internet, with 30 percent favouring laptops. That’s a change from last year, when laptops were favoured by 40 percent of people and phones by just 22 percent.

With mobile being the most significant driver of growth in the online gambling industry over the last few years, particularly the rise of mobile in-play sports betting, it may well be that the bookies are on the road to offsetting that nasty point of consumption tax.

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