Betfair worries racing industry with move offshore to save tax

[Betfair]

Britain's racing industry urged the Government to close "loopholes" affecting its finances after Betfair became the latest betting group to move offshore to avoid the UK's 15pc gross profits tax.

The betting exchange, which has found the stock market heavy going since October's float at £13 a share, said it would operate under a Gibraltar licence from today.
Such a move would have saved Betfair £18.5m gross profits tax last year. However, it said that, after the costs of relocating technology and staff to Gibraltar and Ireland, the move would add £10m to its earnings before interest, tax, depreciation and amortisation in 2012 and £20m the year after.

Analysts largely welcomed the news. James Hollins at Evolution Securities, said "Betfair has made a strategically and financially sensible move to reduce its tax bill". The shares jumped 67.5 to 955p.

However, Betfair's decision – following similar moves in 2009 by Ladbrokes and William Hill – provoked jitters in racing circles. That was despite Betfair's assurances that it would voluntarily maintain the £7m a year contribution to fund the sport that it currently makes via the Horserace Levy.

Stephen Morana, Betfair's chief financial officer, said: "We are committed to British horseracing and guarantee we will support it."

A spokesman for the British Horseracing Authority said, however: "The concept of so called voluntary payments is deeply flawed. They cannot be trusted, cannot be enforced,
cannot be planned against."

He called on the Government to "act to close the offshore loophole, to address the regulatory issues and Levy, and restore credibility to the remote gambling framework in Britain".

Bet365, Coral and the Tote are now the only Bookmakers with sizeable UK-based sportsbooks. A Coral spokesman said there were "no current plans" to relocate.
Warwick Bartlett, head of gambling consultancy GBGC, said: "The tax rate in the UK is too high. Companies would much prefer to be in the UK and would come back if the rate was lowered." Paul Leyland, an Investec analyst, said there remained a risk the Government – which is studying offshore gambling – "might use tighter licensing regulation to enforce tax".

Betfair's move came alongside a 6.2pc rise in core third-quarter revenues to £77m.

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