UK Place of Consumption Tax Judicial Review

UK Place of Consumption Tax Judicial Review

UK Place of Consumption Tax – Legal Challenge

The High Court has today found that there should be a reference to the Court of Justice of the European Union (“CJEU”) on important issues concerning the legality of UK gambling taxes imposed on overseas operators. Gavin West, Director of Ampla considers what this means for UK facing operators and whether it could also affect other EU eGaming jurisdictions.


The decision arises from judicial review proceedings issued by the Gibraltar Betting and Gaming Association (“GBGA”) questioning the lawfulness of the UK’s introduction of changes to its gambling tax legislation. With effect from 1 December 2014 eGaming operators were liable to pay UK gaming tax to the extent their customers are located in the UK. Previously tax liabilities were determined based on the location of the operator.

The GBGA argued that the new tax regime contravenes Article 56 of the Treaty on the Functioning of the European Union (“TFEU”). This is on the basis that it restricts the free movement of services.


Mr Justice Charles found that the UK tax on online gambling raises the following issues of European law that should be decided by the CJEU:

  1. 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.
  2. 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.
  3. 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.

In the event that the CJEU find in favour of the GBGA, HM Revenue & Customs could be forced to repay any tax it has collected unlawfully.

What does this mean for operators?

It must be noted that the referral does not constitute a judgement against HMRC. At the time of writing there are no requirements for HMRC to repay any taxes collected to date. In addition, there is no legal basis for operators to legitimately withhold payment of taxes until any CJEU decision.

Instead, operators should review developments periodically and they may wish to protect their position going forward by submitting claims for overpaid gaming tax pending the CJEU decision. However, as operators have 4 years from the date upon which tax is paid to submit claims we would hope for a decision to be received before claims fall out of time.

An interesting additional point to consider is that should the CJEU decide in favour of the GBGA then what is the relevance to other EU gambling taxes? Numerous EU Member States have introduced gaming taxes on a place of consumption basis (for example, Spain, Italy, France, Denmark, Romania etc). If the UK regime is found to be unlawful, by reference to it contravening an EU Treaty then could this argument also be extended to other EU jurisdictions?

In addition, could this affect other EU Member States currently seeking to introduce gambling tax regimes on a place of supply basis (Czech Republic and Ireland come to mind).

Next steps

Operators wishing to consider the wider EU angle should seek appropriate professional advice.

With regards to the UK judicial review there will now be a formal reference from the High Court to the CJEU. However, it must be noted that the referral process is not typically quick and it could quite easily be years rather than months before the referral is heard and a decision is released by the CJEU.

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