Tax (and possibly tough) times are coming for UK-facing gambling operators, as it became clear earlier this month that freeplays and other related incentives and comps offered to iGaming players will be taxed from 1 August 2017.
Tax changes are probably the regulatory amendments most feared by gambling companies because they often come as a big hit to their profits. This will certainly be the case with the taxable treatment with freeplays. At a rough estimate, the amount of £345 million is expected to be generated in freeplays taxes from August 2017 through 2021.
Judging by previous and relatively recent happenings within the industry, the last taxation regulatory changes unleashed what has generally been described as an unprecedented in its scale wave of mergers and acquisitions. Of course, this refers to the introduction of the Point of Consumption tax in late 2014 and the rise in Machine Games Duty in early 2015.
These two key gambling regulatory events changed not only the UK gambling landscape but the global one, as a whole, as three multi-billion tie-ups ensued. When existing taxes increase substantially or new ones are introduced rather surprisingly, it is only logical for operators to look for ways to offset the impacts on their profitability.
In addition to this, it is a well-known fact that the current gambling environment is extremely challenging, with or without additional levies, so having a profitable business is not an easy task at all.
At a time when a new gambling tax change is to be implemented, it is rather curious to see how it would affect the UK gambling industry and whether more operators will be looking for partners to blunt any challenges that may arise.
There is another protruding factor that may further boost the potential for increased merger and acquisition activity in 2017. The Government is preparing itself for a fixed-odds betting terminals witch-hunt and if one happens, this will certainly come as a severe blow to a number of operators having retail operations at the core of their businesses. A crackdown on the controversial gaming devices is anticipated to begin in the early spring of 2017.
Predicting which will be the companies to get involved in merger and acquisition talks next year is a difficult task. However, operators like 888 Holdings, William Hill, and Ladbrokes (now Ladbrokes Coral) have been the usual suspects over the past several months and years. Given their participation in recent discussions, although these did not end in any deals being secured, they will likely continue their look for a suitable partner.
- Author
Daniel Williams
