Freeplays are offers of free bets, discounts and other incentives and promotions made by gambling operators to new or existing customers. Following a consultation in summer 2016, the Treasury announced plans to charge remote gaming duty (RGD) on remote gaming freeplays to bring them more into line with the treatment of free bets in the existing general betting duty (GBD) regime.

The proposals were included in the Finance Bill earlier this year, but excluded from the cut down version which was passed prior to the general election.

However, they now form one of the provisions of the Finance Bill No. 2 2017 going through Parliament. The changes will take effect for accounting periods beginning on or after 1 August 2017 and apply to any remote gaming participation by a UK person.

RGD applies to gaming over the internet, telephone, by television, radio or other electronic communications. Under the new rules, freeplays that are staked by a customer will, in certain circumstances, have a value for the purpose of calculating an operator’s remote gaming profits.

These changes will also mean that freeplays given out by an operator cannot be treated as prizes and will have no value for the purposes of calculating profits.

HMRC estimates the new tax will affect around 130 operators, and estimates suggest it will collect an additional £45m in tax in the first year of operation, rising to £110m by 2020/21.

In developing the legislation, HMRC has made one significant change as a result of the 2016 consultation, relating to the use by remote gambling operators of so-called ‘re-wagering’.

In general betting, freeplays are generally used only once with winnings paid out on successful wagers. In remote gaming freeplays are subject to re-wagering requirements that require customers to play through their ‘winnings’ to a pre-determined value, or pre-determined multiple, before being able to withdraw them.

In its response to the consultation, the government accepted that taxing all freeplays in remote gaming would impose greater burdens than expected. As a result, the new tax will only apply to the first use of freeplays.

In line with the consultation suggestion, winnings will also only be brought into the duty calculation at the end of the re-wagering process. This means the additional burdens on businesses are reduced and are proportionate. Changes will also be made to ensure that games that are free to play for all participants will not be subject to any charge to RGD. Any prizes from these free to play games will also be excluded from the duty calculation.

Policy paper Remote Gaming Duty: reforming the tax treatment of freeplays is here.

Tax treatment of free plays in remote gaming duty – summary of responses, is here.