Chancellor Osborne to signal changes to offshore gambling tax rules

Offshore operators pay no UK tax, while onshore gambling companies pay 15% gross profits tax plus corporation tax. The chancellor George Osborne will fire the starting gun on the Treasury's new tax grab of offshore gambling profits by making a statement to the House of Commons.

The move, squeezed into the House's schedule on Monday, just before the start of the summer recess, follows a statement on the same topic last week by the heritage minister, John Penrose. He announced that every betting company offering wagers to British punters will have to obtain a UK licence – news that was widely seen as a precursor to the UK beginning to tax offshore operators. Like Penrose, Osborne is not expected to give a detailed outline of his plans, but the announcement will start a process leading to a more formal proposal and ultimately a tax-rate change.

A racing industry lobbyist said: "The statement will mean that this will be part of Treasury legislation. There is going to have to be a level of consultation in all of this but I would have thought that [the statement] will mean that the topic will end up being worth four sentences in the chancellor's budget speech next year."

Currently, offshore operators pay no UK tax, while onshore gambling companies are liable for a 15% gross profits tax plus corporation tax. Bookies operating from the UK also argue that they are disadvantaged by VAT.

There are a range of new taxation options open to the Treasury, which include simply imposing the 15% rate on offshore operators dealing with UK punters. However, the leading high-street bookmakers are almost certain to lobby for a drop in the gross profits tax to about 10%, arguing that the duty would also catch rivals who currently pay nothing. One top high-street chain privately insists that such a regime would see it repatriate its offshore operations to the UK.

Gambling analysts have warned that the government cannot simply change the law to raise taxes, which is why many of them believe that the initial move was made by the Department for Culture, Media and Sport [DCMS] and was painted as a consumer protection initiative.

In a note, JP Morgan analyst Richard Stuber remarked: "While the [DCMS] statement is likely to focus on player protection, rather than tax [a Treasury issue], we believe the key proposed change will be a move from recognising supply to recognising demand from a regulatory standpoint. We believe this could be the first step to creating a tax footprint for UK operators regardless of their corporate domicile."