Joseph Borg has had an article published in the eGaming Review Malta Report 2014. The article addresses the UK’s gambling licensing regime and the needs and challenges for Maltese operators of obtaining a UK gambling licence.
It is envisaged that the bill that is currently being discussed in the British parliament, which shall be amending the Gambling Act of 2005 (Gambling Act), will be adopted by May this year. That means that there is still a possibility that further modifications may be made to the bill before its adoption. However, we already have a good idea of what operators based in the EEA, Malta included, and white-listed jurisdictions are in for.
The transitory process
Once the bill becomes law and the amendments to the Gambling Act come into force, only operators that are in possession of a UK licence or that obtain a ‘continuation licence’ from the UK Gambling Commission (UKGC) will be allowed to operate and advertise in the UK. Holders of licences from EEA member states and other white-listed jurisdictions will be able to automatically obtain a ‘continuation licence’ if they apply for a UK licence within the cut off period that will be established. The ‘continuation licence’ will remain valid until the applicant receives a UK licence from the UKGC. There will be no continuation licence for gambling software providers. However, we are informed that the UKGC is working on a transitory procedure that will allow operators to keep using the current software until the software suppliers obtain the necessary licences.
What operators should be aware of is that only the games that are currently being provided in the UK through the Malta licence (or through a licence from another EEA member state or a white-listed jurisdiction) may be operated under the ‘continuation licence’.
The UKGC will not be accepting any physical application forms. However, operators will be able to fill and submit the application forms online via the online system that has been set up by the UKGC and which is now up and running.
Unlike in Malta, in the UK you do not apply for a business to consumer licence or a business to business licence. The UK licensing regime offers a gambling software licence and an operational licence. Software platforms might also require an operational licence apart from the software licence in the UK. On the other hand, business to consumer operators may require subsidiaries within their group to also apply for a gambling software licence. Furthermore, certain service providers that do not require a licence under the current Maltese licensing regime and other similar regimes in Europe, may still require a gambling software licence in the UK.
Operators may be required to restructure their corporate structures in order to comply in the most effective and efficient way with the UK licensing regime and avoid the need of applying for multiple licences.
Applicants need to make several considerations before applying for a licence. One of these considerations relates to the category of licence, which is based on gross gaming yield and which will determine licence fees payable to the UKGC.
In calculating the projected GGY for the subsequent year, operators need to make sure to include only gaming activity that will be processed under the UK licence.
Unless lotteries are for ‘good causes’, fund raising purposes, the UKGC does not issue any licence for such lotteries. Commercial lotteries and other similar games, such as scratch cards, may only be operated by the holder of the National Lottery licence.
Fit and proper
As part of the business plan that must be submitted together with an application to the UKGC for a gambling licence, an operator must submit a list of jurisdictions in which it provides its services. If it offers its services to customers in jurisdictions from which it does not hold a local licence, it is expected to provide a legal justification of the basis on which it does so.
This is quite different from the approach which Maltese licensed operators are used to, which is that a licence issued by the LGA is conditional on a general requirement that the licensee must act within the law. The UKGC’s requirement is rather more in line with requirements in Nevada.
Personal management licence
Another difference between the UK’s and Malta’s licensing regime is that, whereas in Malta directors of the licensee company and shareholders (beneficially holding 5% or more of the licensee) are required to file personal declaration forms with the LGA which includes a significant amount of information on their background, including statement of assets and liabilities, similar declarations are required by the UKGC from shareholders, (beneficially holding 10% or more of an applicant for a licence) of applicants for a licence and in addition, persons performing the following functions with an applicant are required to obtain a personal management licence:
- Overall strategy and delivery of gambling operations
- Financial planning, control and budgeting
- Marketing and commercial development
- Regulatory compliance
- IT provision and security related to gambling
Operators are encouraged to seek advice as to who within the organisation is required to apply for the personal management licence.
The tax in the UK is currently set at 15% on GGR for all transaction recorded on servers located in the UK territory. However, this year parliament passed amendments that, once in force, will impose such tax on transactions that involve British residents. It is interesting to note that the tax on consumption amendments will come into force on 1 December of this year. Therefore, unless operators decide to place equipment in the UK before that date, it is our understanding that they will not be required to pay the 15% on profits before that date, even though they would be operating under a UK licence.
Interestingly, to date operators licensed in Malta which also hold a licence from another EEA member state are only expected to pay gaming tax in Malta in relation to activity under their Maltese licence where tax is also being paid under a different EEA licence in respect of a part of an operator’s activity. It is questionable whether benefitting from continuation rights granted by the UKGC would be considered by the LGA to be equivalent to operating under a UK licence. Operators ought to take advice on their liability to Maltese gaming tax where it is a Malta licensee which also obtains a UK licence.
Start preparing yourselves from now
We strongly advise operators that take business from the UK to start taking the necessary actions from now. Relying on a Maltese licence will not be sufficient for Maltese operators wishing to take UK business going forward. Maltese licensed operators currently taking business from the UK market ought to take advice both on UK licensing and on how their Malta operations and their tax liabilities in Malta will be affected.