HMRC Wins Free Spins Tax Dispute, Increasing Pressure on UK Gambling Operators
HMRC Secures Key Victory on Free Spins Taxation
HM Revenue and Customs (HMRC) has achieved a major win in its efforts to enforce tax compliance within the online gambling industry. A recent tribunal ruling confirmed that free spins given as promotional incentives fall under the scope of remote gaming duty (RGD). This decision resolves longstanding disagreements between regulators and operators over the tax treatment of such offers.
Tribunal Clarifies Tax Treatment of Promotional Spins
The case involved Jumpman Gaming Ltd, which contested HMRC’s claim for more than £13 million in unpaid duty linked to its UK-facing online casino operations. The dispute focused on the operator’s “Mega Reel” feature, where users can win prizes including free spins and other bonuses.
Jumpman acknowledged the first spin as a taxable event but argued that subsequent free spins awarded through the promotion were exempt from tax. The company also challenged HMRC’s adjustments based on the timing of the reassessment.
However, the First-tier Tribunal sided with HMRC, interpreting sections 159 and 159A of the Finance Act 2014. These sections address freeplay and waived wagers. The tribunal determined that while the initial Mega Reel spin did not incur duty, any free spins given as prizes must be treated as gaming payments subject to remote gaming duty.
Implications for Operators and the Industry
Although the tribunal found that Jumpman Gaming overpaid tax on the initial spins, the ruling confirmed that taxes are owed on the additional free spins. The court also dismissed Jumpman’s procedural objections, upholding HMRC’s amendments as lawful.
This decision is expected to prompt many online gambling operators to review their compliance procedures relating to promotional free spins to avoid similar tax disputes. The ruling may also cause operators to reconsider the generosity of bonuses and free spin offers since increased taxation impacts profitability.
HMRC has made it clear that promotional plays substituting real cash wagers must be taxed accordingly. This stance signals stricter enforcement of taxation rules on bonus schemes designed to engage players.
Context and Legal Precedents
The ruling aligns with HMRC’s earlier successful challenge against Broadway Gaming in 2022, where the court confirmed that free plays should be factored into remote gaming duty calculations. Both cases together clarify the UK tax authority’s firm position that free spins and similar incentives are not exempt from duty.
