British Bookmaking Firms in Offshore Moves

British horseracing’s finances will take a knock following the news that the UK’s two biggest bookmaking firms are to move their Internet betting operations offshore.

 In an attempt to save around £10 million in tax and racing levy deductions, bookmaker William Hill announced that it is relocating internet operations to Gibraltar, on the southern tip of Spain, which has long been the main base for some bookmakers operating in the British market such as Victor Chandler and Stan James.

 Within days of that poorly-guarded secret becoming official, Ladbrokes, the UK’s biggest gambling company, confirmed what many had speculated upon that it would also transfer its Internet sports book, with 25% of the business concerning horseracing, to Gibraltar by the end of the year.

 Ladbrokes and William Hill form what is known as the "Big Three" bookmaking firms in Britain, along with Coral. The last-named is staying resolutely in Britain, at least for the moment.

 The British government, which only a few years ago declared it wanted the country to be the world center of bookmaking, is conducting through the Department for Culture, Media and Sport a review of remote gambling which is now principally offshore.

 The moves offshore are a response to the loss of market share to off-shore rivals such as Victor Chandler and Sky Bet that pay only 1.5% of their gross profits in tax. Sky Bet moved to the island of Guernsey at the end of July.

 The offshore relocation removes the bookmaking firms from an obligation to pay Britain’s 15% gross profits betting tax. However, the blow to racing comes through the loss of 10% profits tax on UK horseracing bets that the Levy Board collects from wagers struck with bookmakers in Britain.

 It is estimated that the total loss will be between £4- and £5-million in levy contributions from the two firms, much of which would have been ploughed back into racing as prize money. While Ladbrokes chief executive Chris Bell has mooted the possibility of a voluntary £2-million donation to the levy to cover the shortfall, William Hill has no intention of considering any similar measure.

 Both Ladbrokes and William Hill will continue to have most of their bookmaking businesses in the UK and still expect to pay around £40 million and £25 million respectively in levy this year, with only their Internet operations moving offshore. However, telephone betting could follow.

 Mike Dillon, PR director of Ladbrokes, commented: "It is a commercial decision which has not been taken rashly -- we looked at it very carefully -- two of our competitors have gone offshore in the last seven days..

 "We will wait and see what the government review comes up with and reassess from there. We hope for a level playing field in Britain."