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What Is POC Tax & How Does It Affect Gambling in the Uk?

What Is POC Tax & How Does It Affect Gambling in the Uk?

If you are a British online gambler, the POC or Point of Consumption tax is a familiar matter to you. It was imposed back in 2014 when an amendment was made to the Gambling Act 2005. This tax covers all online live casinos operating from the United Kingdom of England, Scotland, and Wales.

Before 2014, it was a well-established fact that the UK had a liberal attitude toward remote gambling. However, in 2014, it all changed suddenly with a single amendment. Without further ado, let’s jump into the reason that forced the change.

Why Was Poc Tax Commissioned?

The inclusion of POC tax in the 2005 Gambling Act is a recent affair. Earlier before 2014, online casinos operating in the UK had their headquarters established in places like Gibraltar, Isle of Man, and Jersey.

The reason behind these offshore headquarters is, small independent island nations has somewhat relaxed taxation policy for corporates. Live casino owners took full advantage of it and continued operating in the UK without paying a single penny to the nation.

In 2014, when internet penetration increased and live casinos were adding new users everyday, UK parliamentarians noticed the loss of tax and created the amendment. The new rule states that any foreign gambling houses have to pay 15% of their gross profit from the UK on the place of consumption basis.

Which Are the Games Included in POCT?

Point of Consumption Tax was applied to all ‘game of chances’ consumed in the UK. The game operator may be of foreign origin. Still, if he is operating in the UK and UK citizens are participating in it, then the operator has to pay Point of Consumption tax to Her Majesty’s Revenue and Custom (HMRC).

POCT can be classified into three categories; General Betting Duty(GBD), Remote Gaming Duty(RGD) & Pooled Betting Duty(PBD). GBD covers all land-based casinos, racecourses, and sports betting forums. The live casino comes under RGD while pooled bets books with the help of bookmakers come under PBD. All of these duties were at the same level of 15% until recently, HMRC made a change in RGB. We will talk about the recent changes in the latter part of the article.

POCT’s Impact in the Gambling Industry

To be honest, the introduction of the Point of Consumption tax didn’t have much impact on the UK’s gambling industry. Sure, the shares of gambling corporation had a minor hit when the news broke out but recovered quickly. Also, shareholders might have missed a dividend due to the new cost factor.

UK’s gambling industry is exceptionally resourceful so it can take such hits without stumbling much. All gambling giants like William Hill, Bet365, or Paddy Power held their business firm. However, it might have taken a toll on some small-scaled casinos forcing them to go out of business, thus making the sector less crowded.

Recent Changes in RGD

Since its inception, RGD has always been at 15% until the latest change, announced in the 2018 budget. From 1st April 2019, RGD has been increased by 6%, taking the tax rate of online gambling to 21%.

Presently, the online gambling market is generating an all-time high growth rate. The market has been expanding at an enormous speed. Out of $15 billion yearly sales figure of gambling in the UK, online sources generate over $5 billion. This increment of tax means HMRC wants to get a more significant piece of this pie.

However, this rate increase is a good thing for society. Gambling addiction can harm some people, making their social life miserable. So, just like other additives like cigarettes and alcohol, gambling should be taxed at a special rate. These extra revenues can be used to help people fight gambling addiction.

Effects of Tax Increase

There are always some immediate effects associated with a tax increase in any sector. Some sectors face a small-scale recession while the gambling market sees a rise of black marketers. Tax hike means casinos will provide less compelling odds. This may encourage some people to place their bets in black markets where taxation doesn’t affect.

If you are thinking of the same and want to check black market odds, I would suggest that it is not a good idea. There will be no protection of law and order, and if something goes wrong, you may end up losing your hard-earned money.

Final Thoughts

The UK Government has to plan its move with gambling taxation. The growth of the remote gambling industry gives them an opportunity for revenue inflow. However, they have to act wisely. If they start a systematic tax rise like tobacco and alcohol, gamblers may move to other foreign places using a VPN. If that happens, then it will be a loss for the UK.