Betfair heads to Gibraltar to cut tax bill

UK-based Betfair will now operate under a Gibraltar gaming licence, arguing that it's at too big a disadvantage otherwise...

by James Taylor
Last Updated: 19 Aug 2013
Betfair has become the latest British company to park some off its operations offshore: the online exchange, which listed last year, says that it will save more than £18m a year by moving its gaming licence from the UK to low-tax Gibraltar. This might seem a little cynical, and not very in keeping with the Government's 'we're all in this together' party line'. But since most of its competitors have already done the same thing, Betfair can reasonably argue that operating in Britain was becoming a source of competitive disadvantage. It's another reminder of how difficult the Treasury's balancing act on tax really is...

Betfair insists that it isn't just doing this to cut its tax bill. The company said the move would also help it to improve its technology platform by providing it with 'the freedom to locate key technical equipment in more efficient locations' (Gibraltar being a well-known technology hub, natch).  What's more, it will continue to pay the UK horse-racing levy (the cash squeezed out of bookies to support the sport. And it says there are no plans to cut down on the 1,200 staff it currently employs in the UK - although presumably the chances are that any further expansion (i.e. new jobs) will happen abroad, either in Gibraltar or at its new base in Ireland.

Nonetheless, it's clear that financial planning was a major reason for this switch: it expects to save £18.5m in tax and boost underlying earnings by £10m. That’s not to be sniffed at. And the key point is that this is £18m that competitors like William Hill and Ladbrokes are not spending, because they've already switched their online business over to Gibraltar. The UK government charges 15% tax on gross betting profits, and as long as Betfair is paying this while rivals are not, it's clearly at a competitive disadvantage.

So is it time for the Government to act? We can't imagine many people would be too sympathetic towards bookmakers wanting to squirrel away more of their profits. But there's a good argument that as far as the UK tax take is concerned, something is better than nothing - if our tax rate is driving the industry out of the country, perhaps the Government needs to change it. It’s been talking about reform for a while now, but so far hasn't come up with anything concrete. Clearly Betfair got tired of hanging around - and since it's easy enough for companies like this to operate out of a different jurisdiction, this was always the likely outcome.

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