Betfair (LON:BET) has decided to escape the 15% gross profits tax in the UK by moving offshore to operate under a Gilbraltar license; a move that will save them close to 20m GBP. The news was announced in the company’s third quarter results.
This move is following the footsteps of two rival gaming operators, William Hill and Ladbrokes. They both announced that they have saved millions of pounds since leaving the UK two years ago to operate under a Gibraltar gaming license.
The CEO of Betfair, David Yu has made it clear that he intends to move more of the company’s general operations offshore. They already opened a new office in Dublin to house their telebetting operators and new data centre in October. Many considered this a warning to the British government to do something about the tax increases that were being proposed to cover horse-racing and other types of betting. For the time being they are continuing with regular tax payments.
Officials in the UK have reviewed the licensing system, but have yet to make any firm decision on whether or not there will be any reform or amendments. Though, Betfair is pulling substantial weight and reforms to the laws may come into light. Just last year they paid out over 6m GBP in payments not including an additional payment of 1.25m GBP which covered the range of overseas customers betting.
Yu also commented on the situation, saying that Betfair has already transfered most of its major systems to Gibraltar and Dublin. They have gainfully employed over 120 people at their new locations, since leaving the UK. He also commented saying that this new structure would “provide the company with the freedom to locate key technical equipment in more efficient locations in order to improve service to customers and compete on a level basis in the UK market”.
Questions were raised over the general wellness of Betfair’s ongoing contributions to the horse-racing and betting industry in a conference call with city analysts. Suggestions were made that the lack of goodwill in the industry might lead to sponsorship being a more viable option that levy contributions. Yu further commented saying that the company will continue on conversation with the racing board before making the final decision on how to go about contributing.
“We believe making contributions to racing is important, and we will look at what the right mechanism is. We need racing to do well and if it continues to thrive that would only be good for our business.”
Betfair commented saying that their operational costs would increase in the short term period due running data centers at their current and new locations, of course with their costs going down as further system consolidation took place by the end of the year. They are then projected to see annual tax savings of 20m GBP and 10m GBP in underlying earnings, a substantial win for the company.
They also mentioned that they will continue their incorporation in the UK and hire 1,200 new people to the headquarters in Hammersmith, London, also at their offices in Halifax and Stevenage.
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