UK Point of Consumption Tax Comes Into Effect

The UK Government attracted some controversy over the last year and a half after it announced plans to implement a 15% tax on the gross profits of online gaming companies that have UK customers.

Well, the tax – known as the Point of Consumption tax – is now a reality, having come into effect yesterday. The new tax will be placed on all gaming companies who have customers residing within the UK, regardless of whether or not the companies are actually based in the country.

According to the Exchequer Secretary to the Treasury, Priti Patel, the point of consumption tax will help create a more level playing field between ‘offshore’ companies and companies based in the UK.

The tax may affect online gaming companies based in Overseas British Territories such as Gibraltar and the Isle of Man, which have long been havens for online gaming networks. Among them is the Isle of Man-based PokerStars, which hosts customers from all around the world, including Great Britain, but not the U.S. This makes it likely that the largest online poker site may have to pay the point of consumption tax.

Online gaming companies based in Gibraltar previously paid a levy of one percent of gross profit and one percent tax on turnover from fixed-odds betting, though both of those were capped at £425,000.

Bwin.party, which operates PartyPoker, is one company that is based in the southern European Overseas British Territory. While its poker offering does not constitute a huge chunk of its online gaming offerings, any decrease in the number of UK players on PartyPoker may be a concern for the company.

888 also has its headquarters in Gibraltar and could also be affected by the new point of consumption tax. The company has been doing well overall as of late, having posted a profit of $53.2 million for the whole of 2013, which was a 30% increase over the year before.

Its online poker site, 888poker, has also been doing well, having firmly established itself as the second largest poker room in terms of poker traffic. Given the strength of 888poker over the last year, it is unlikely that the network will be significantly adversely affected as a result of the newly imposed UK tax.

The first day of the point of consumption tax coincided with reports that online gaming revenues in the UK increased to 17% of the country’s overall gaming share.