CMS UK partner Stephen Hignett says the ruling represents a rare piece of positive news for a UK online gambling sector plagued by regulatory headwinds and tax hikes
Operators that paid Remote Gaming Duty (RGD) on certain free-spin promotions should consider seeking refunds from HMRC following Jumpman Gaming’s recent court victory, leading tax lawyer Stephen Hignett has told NEXT.io.
The Upper Tribunal ruled on Friday that approximately £13.2m in additional RGD demanded from Jumpman should be reduced to zero, overturning a key part of an earlier First-tier Tribunal decision.
The dispute centred on a Jumpman welcome promotion that allowed customers making a qualifying deposit to play its Mega Reel for free. That game could then award free spins to use on other casino games.
Speaking exclusively to NEXT.io following the ruling, CMS UK partner Hignett said its significance could extend to other operators that have paid RGD on comparable promotions, as well as those still facing assessments from HMRC.
“Operators that have accounted for RGD on free spins won from games that are always free to play should consider applying to HMRC for a refund of RGD,” he added. “Operators typically have four years in which to do so.”
Hignett has particular experience advising gambling businesses on RGD and HMRC enquiries and has previously written extensively about the tax treatment of freeplay promotions.
Not every spin is the same
Hignett warned the Jumpman decision concerns a particular type of promotion and should not be read as applying indiscriminately to every free spin offered by a casino.
The distinction comes down to whether a promotion involves a game that is always free-to-play – such as Jumpman’s Mega Reel game – or a typical paid game where a customer would normally have to pay but, as part of a promotion, is allowed to play without paying the normal stake.
Hignett explained that the legislation clearly provides relief where a player wins free spins from a paid game that they have been allowed to play for free. In this instance, RGD will arise on the initial game, because the normal stake has been waived, but the subsequent use of free spins won from that initial game will be exempt under specific re-wagering provisions.
HMRC had historically taken a different approach where the original game is always free to play. Its position was that free spins won from such a game did not qualify for the same relief when used to play other games, which was the central issue considered by the Upper Tribunal.
“The Tribunal judges analysed the different interpretive arguments (which they conceded pointed in both directions) but came down in favour of Jumpman’s interpretation,” Hignett told NEXT.io.
That interpretation, he explained, means “a free spin won from any remote gaming (including games that are always free to play) should, when used, be exempted from RGD.”
The ruling therefore does not establish that all free spins are exempt from RGD. The distinction lies in how the exemption applies to free spins generated by this particular type of promotional game.
Other operators could be affected
Hignett explained HMRC has recently been issuing RGD assessments to operators offering games that are always free-to-play, with the tax body treating the subsequent use of free spins won through those games as subject to duty.
If the Upper Tribunal ruling stands, he said operators affected by that interpretation should carefully consider their position.
“If the Upper Tribunal’s decision is not successfully appealed by HMRC, operators should be seeking to obtain repayment of RGD where relevant and/or have such assessments withdrawn,” Hignett said.
There is already evidence that the dispute may have financial implications beyond Jumpman’s own £13.2m bill, with Evoke among the operators publicising their own potential exposure had HMRC succeeded in their case.
Hignett’s comments now raise a separate question for operators that went one step further and actually accounted for RGD on comparable free spins: whether tax already paid to HMRC could now be recovered.
HMRC could still appeal
There is one important caveat, in that the Upper Tribunal only handed down its decision on 25 September, so HMRC could still seek permission to appeal.
“HMRC may yet be granted leave to appeal,” said Hignett. “So this might not be the end of the story.”
For Hignett, the decision nevertheless represents a rare piece of positive news for a UK online gambling sector plagued by regulatory headwinds, including multiple tax hikes.
“It represents an important win for the taxpayer, which is (rare) good news for the UK-facing remote gambling sector,” he added.