Gambling Sector - Regulatory and Tax

Regulatory | Corporate Tax

A start-up in the gambling sector sought comprehensive advice on both the regulatory and tax aspects of their proposed business.

The founders had developed an innovative online gaming platform and wanted to launch in the UK market, which required both a Gambling Commission licence and careful attention to tax structuring.

Gambling is one of the most heavily regulated sectors, and the tax treatment of gambling operations is unique.

General Betting Duty, Machine Games Duty, and other specific levies apply, and the VAT treatment of gambling is complex due to the exemption for most gambling supplies.

Our work covered several areas:

Regulatory Compliance: We advised on the requirements for obtaining a Gambling Commission operating licence and personal management licences. This included reviewing the proposed business model to ensure it complied with the Licence Conditions and Codes of Practice, advising on responsible gambling obligations, and reviewing the AML and KYC procedures.

We prepared key regulatory documents, including incident reporting procedures, responsible gambling policies, and customer interaction frameworks.

Corporate Structure: We advised on the appropriate corporate structure for the business, considering the regulatory requirement for the licensed entity to have adequate resources, the desire to segregate risk, and tax efficiency.

Tax Treatment: We analysed the application of gambling duties to the proposed activities, advised on the VAT treatment of different revenue streams, and considered the corporation tax position including the deductibility of various expenses.

Employment Taxes: The business intended to engage contractors as well as employees. We advised on the employment tax treatment and the application of IR35 to proposed engagements.

The founders were particularly concerned about getting the regulatory aspects right, as any compliance failure could result in licence suspension or revocation. We worked closely with their legal advisers to ensure that the governance framework was robust.

We also modelled the tax position under different scenarios, helping the founders understand the effective tax rate on their business and the cash flow implications of the various duty and VAT obligations.

Outcome

Comprehensive regulatory and tax framework established. Regulatory documentation completed and submitted to the Gambling Commission.

Corporate structure implemented. Business successfully launched with all necessary licences in place.

This case study is based on a real client matter. All identifying details have been removed or changed to protect client confidentiality.