The European Court of Justice should be referred to on important issues concerning the legality of a tax imposed on overseas gambling operators, according to a judgment handed down by the High Court, which could have major implications for the UK’s point of consumption regime.
Law firm Olswang has claimed that if the current tax framework is found to be in breach of European law, HMRC could be ordered to repay all of the tax it has unlawfully taken.
A challenge on the tax changes imposed on the offshore industry by The Finance Act 2014 was submitted to the High Court by the Gibraltar Betting and Gaming Association (GBGA), which argued that the new tax regime was discriminatory and restricted the free movement of services, contrary to Article 56 of the Treaty on the Functioning of the European Union (TFEU).
Olswang has said that Mr Justice Charles has now found in favour of the GBGA that the UK tax on online gambling raises the following issues of European law that should be decided by the Court of Justice of the European Union:
- Whether a restriction on the provision of services from Gibraltar to the United Kingdom engages the right to free movement protected by Article 56 TFEU. Mr Justice Charles held that this was an issue of constitutional importance.
- Whether the taxes payable under the new tax regime constitute restrictions on the right to the free movement of services for the purposes of Article 56 TFEU. HMRC had argued that in order for a tax measure to be a restriction for the purposes of Article 56 TFEU it is necessary for it to be discriminatory. Mr Justice Charles held that in this regard HMRC had relied on a principle of law which has no clear precedent in European law.
- Whether the aims relied on by the UK Government to justify the new tax regime are legitimate. The reasons given by the UK Government for the new tax regime included addressing a perceived competitive advantage for overseas operators and increasing UK tax revenue.
The next stage will be a formal reference by the High Court to the Court of Justice of the European Union for determination.
Dan Tench, Head of Public Law at Olswang LLP, commented: “The case raises important questions for the future of online gambling in the UK. It also touches on broader issues about the UK Government’s ability to tax businesses outside its jurisdiction. We look forward to these issues being considered by the Court of Justice of the European Union.”
Olswang LLP, Dinah Rose QC, Brian Kennelly and Jessica Boyd (all of Blackstone Chambers) are instructed by the GBGA. Mischon de Reya, Lord David Pannick QC and Ravi Mehta (both of Blackstone Chambers) are instructed by the Government of Gibraltar. Kieron Beal QC (Blackstone Chambers) and Oliver Jones (Brick Court Chambers) are instructed by HMRC.