Treasury - Customs and Excise Division. Notice 451A ONLINE GAMBLING DUTY. September 2007 (Amended to 11 th October 2010)

Transcription

1 Treasury - Customs and Excise Division Notice 451A ONLINE GAMBLING DUTY September 2007 (Amended to 11 th October 2010) 1

2 Introduction The information in this Notice was up to date at the month shown on the cover. This is a general guide to assist those liable to pay online gambling duty on their operations in the Isle of Man. The law can be found in the Online Gambling Regulation Act 2001, as amended by the Gambling (Amendment) Act 2006, and in Orders and Regulations made under the 2001 Act; and in the Customs and Excise Management Act 1986 and regulations made under that Act. Nothing in this Notice may be taken to change the law. If you have any doubt about the law, or have any queries about accounting for online gambling duty, please contact the Advice Centre - PO Box 6 Custom House North Quay Douglas Isle of Man IM99 1AG Tel: (01624) Fax: (01624) customs@gov.im Customs and Excise has a website at You should note that online gambling duty, unlike many other customs and excise revenues, is not the subject of any revenue sharing arrangement with the UK; and online gambling duty is not covered by the Customs and Excise Agreement 1979 between the Island and the UK. Therefore the rates of duty in force, and the laws, rules and regulations involved may be different in the Island from those in place for corresponding duties in the UK. 2

3 If you have any queries regarding licences, authorisation to operate, or the rules governing premises then please contact - The Isle of Man Gambling Supervision Commissioners Homefield 88 Woodbourne Road Douglas Isle of Man IM2 3AP Tel: (01624) Fax: (01624) Website: gaming@gov.im This Notice is concerned only with online gambling duty. There are other forms of excise duty associated with gambling. These are - Lottery duty Society lottery duty General betting duty charged on the National Lottery games charged on any British Society lottery scratch cards approved for sale on the Island charged on bets made with bookmakers (including betting exchanges, bet-brokers etc) through premises ( betting shops ) licensed for business only with non-online business. See Notice 451 (MAN). Enquiries regarding the administration and collection of any of the duties above should be directed to the Advice Centre at Custom House. Enquiries regarding the approval and licensing of any activity liable to these duties should be directed to the Gambling Supervision Commissioners. Enquiries regarding the licensing of spread betting should be directed to: Financial Supervision Commission PO Box 58 Finch Hill House Douglas Isle of Man IM99 1DT Tel: (01624) Website: 3

4 CONTENTS Glossary 1. General 2. About the Duty What this Notice is about Transitional arrangements for bookmakers transferring to the OGRA regime Can an operator advertise in the UK? What is online gambling? What is online gambling duty? What is Gross Gaming Yield? What is Retained Profit? Is all online gambling in the Island liable to duty? How do I determine my duty liability under the retained profit method? Can I make any deductions when determining my duty liability under the gross gaming yield method? Can I get a repayment of duty if I lose on bets, wagers etc? Is online gambling by Island punters with operators in the UK liable to duty? Who has to pay the duty? What is the rate of duty? How do the tiered duty-rates work? When is the duty due? Can I deduct anything other than winnings? Bad debts including chargebacks Can I carry forward losses? Do I deduct just the money paid out to a winning punter? I accept bets, wagers etc passed on to me by other operators - what is their liability? What about free bets and player bonuses? 3. Notification and Security Must I tell anyone before I start business? What rules and regulations govern the operation of my premises? Do I need to pay security? What happens if I cease trading? 4. Returns, Accounts and Records Must I keep a record of bets, wagers etc received? Must I keep a duty account? How do I pay the duty? Who supplies the returns? When must I fill in my return? How long must I keep my records? Can I apply for non-standard accounting periods? 4

5 5. Legal Powers and Penalties What are the legal powers of Customs and Excise? What are the penalties for offences? What if I am unhappy with the way I have been treated by Customs and Excise? Recovering unpaid duty 6. Particular Types of Betting What rules cover wholesale, hedged or laid-off bets, wagers etc? Is duty due on commission or discount? Is duty due on void bets, wagers etc? Is duty chargeable on free or discounted bets, wagers etc? What is spread betting? What is the liability of spread betting? What is sponsored pool betting? What is rebate betting? Are there any restrictions on overseas gambling? What are bet-brokers? Are bets made through bet-brokers liable to duty? What are betting exchanges? What is the liability of betting exchanges? What is the definition of commission charges? Does Customs and Excise have any special requirements for betting exchanges? What about Fixed-Odds Betting Terminals (FOBT)? Pool betting and pool betting duty What about bets from UK punters? 7. VAT on online gambling 8. Appeals Is online gambling liable to VAT? What about other activities? What can I do if I am not happy with a decision made by Customs and Excise or the Treasury? What about assessment of duty? 5

6 Glossary 2001 Act The Online Gambling Regulation Act See also OGRA. Advice Centre Agent Betting exchange Betting operation Bet-broker Bet-taker Betting office Bookmaker The Business Advice Centre, Custom House, Douglas, Isle of Man. A person who represents an operator, and who passes bets, wagers etc to that operator. These are a means whereby individual punters can place wagers against one another on opposing outcomes of a given event. The operator of the exchange facilitates the wager, holds any stakes placed by either party, and arranges for payment of any winnings. Term used under OGRA 2001 for any business, or part of a business, involved in the negotiating or receiving of a bet - and would encompass bookmakers etc licensed under that Act. A person who provides facilities whereby two or more other persons can place bets with one another, or who acts as the agent of the original punter (whether or not the identity or existence of the original punter is disclosed). A person who receives bets from a bet-broker. Betting offices or betting shops are premises in the Island providing betting services to members of the public in the Island and which are not licensed, nor required to be licensed under OGRA. A person acting on his own account or as servant or agent to any other person and who is carrying on the business of receiving and negotiating bets, or by way of business holds himself out as person who receives or negotiates bets, or who conducts such operations. If conducting business online they would be liable to online gambling duty, but if operating through a betting office (see above) they would be liable instead to general betting duty under the Betting Act See also bet-broker. Collector Co-mingled, and Co-mingling Commission agent Commission charges The Collector of Customs and Excise. Where a sponsored pool betting operator aggregates wagers received from two or more sources for input into a totalisator system or process. See Agent. Commission charges means the amounts that the parties to a bet, wager etc (whether involved in placing or accepting the bet, wager etc) are charged by the operator, whether by deduction from winnings or otherwise for using the facilities. Any entry fee or other charge for using the facilities should be included in the commission charges. 6

7 Customs and Excise Agreement Disaster recovery This is an agreement between the Isle of Man and the UK whereby certain indirect taxes are maintained at the same rates in each jurisdiction, and are subject to the same reliefs etc. The revenue from these taxes are pooled and shared. Pool betting duty and lottery duty are amongst the revenues pooled and shared. Where an operator properly licensed in another jurisdiction is making use of facilities that are provided by a duly authorised disaster recovery provider under the provisions of the Online Gambling (Disaster Recovery) Regulations Gambling Supervision Commission The body responsible for the control of betting and gambling activities on the Island. Gross gaming yield The gross profit of an operator which is liable to online gambling duty. This is determined - (for operations mentioned in paragraph 2.5) on the commission and other charges made to, or retained by, the operator (known as retained profit ); or (for other types of operation) stakes less winnings. Officer OGRA Operator Pari-mutuel betting Pool betting duty Punter s agent Means an officer of customs and excise. The Online Gambling Regulation Act Persons licensed under this Act are liable to online gambling duty on their gambling activities and not general betting duty, pool betting duty (but those conducting pool betting would be liable to duty at a special rate corresponding to the rate of pool betting duty in the UK), or lottery duty. In this Notice, means anyone liable to pay online gambling duty, or who would be liable to such duty if it were not waived or subject to a statutory or extra-statutory concession - whether licensed under the OGRA or not. See Sponsored pool betting. This duty of excise is one of the shared revenues under the Customs and Excise Agreement. Until 1st September 2007 all pool betting duty was charged in the Island under the Pool Betting (Isle of Man) Acts From that date pools promoters operating online became liable to online gambling duty if conducting relevant business under OGRA. However, they are liable to a rate of duty corresponding to the rate of pool betting duty in the UK, and not to the standard rates of online gambling duty. Duty paid by the promoters is shared with the UK under the Agreement. See Agent. 7

8 Rebate betting Retained profit Where punters betting above a pre-set minimum amount in a given period are guaranteed a percentage rebate or refund on their stake money regardless of results. Such betting will normally involve payments by the bookmaker not only to the punters, but also to agents who organise and administer a pool of punters involved in the arrangement. Means that profit accruing to the operator from the players of a game, in the form of commission, entrance fee or otherwise in the course of the type of online gambling specified in regulation 5(2) of the Online Gambling Regulations 2008 during the period in question. The types of games specified in regulation 5(2) are - a. prize draws, prize competitions or lotteries; b. poker or other games where individual players play against one another using systems or facilities provided by the operator; c. sponsored pool betting and pari-mutuel betting which employs the use of a totalisator, or any form of pool betting (note that pool betting not involved in a sponsored pool betting system, and which would have been liable to pool betting duty prior to 1st September 2007 is liable to a higher rate of duty - see paragraph 6.17); d. a betting exchange; e. where the operator acts as a bet-broker; and f. spread betting. Return Security Sponsored pool betting Spread betting The return submitted by the bookmaker to Customs and Excise detailing the amounts of stakes and duty due. An arrangement whereby the bookmaker provides security to Customs and Excise for the payment of duty which is or which may become due. A form of pool betting which, however, may be liable to general betting duty (or, if carried out under a licence granted under the 2001 Act, online gambling duty) and not pool betting duty. It utilises totalisator facilities and is also known as tote betting or pari-mutuel betting. A form of betting where the punter bets on a range of possible outcomes or results. The punter can therefore win or lose an amount which is not reckonable at the time of placing the bet. Operators offering spread betting may require a licence from the Financial Supervision Commission (in addition to any licence as a bookmaker or online gambling operator). Any bets would be liable to general betting duty. See paragraph

9 Stake money (or stakes) Statement (or Duty Statement) Totalisator The total amount paid or due to be paid by the person making a bet to an operator or a bookmaker. See Return. A system, usually mechanised, for pool betting whereby a punter buys a ticket in the pool. A percentage deduction is made for duty, profit and expenses. The balance is paid out in the form of a dividend between successful punters. Totalisator operator A person who operates one of the following - a. facilities provided by the Horserace Totalisator Board in the UK; or b. facilities provided under the authority of the Horserace Totalisator Board on an approved horse racecourse by the racecourse management; or c. any other totalisator. Tote betting Winnings See Sponsored pool betting. Total amount of money, credit etc returned to a punter on a winning bet, wager etc. 9

10 General 1.1 What this Notice is about This Notice explains - who has to account for online gambling duty what bets, wagers etc are liable to the duty how the duty is calculated what records and accounts you must keep the legal powers available to Customs and Excise. This Notice has been revised and represents the interpretation of the law by Customs and Excise as at the date shown on the front cover. The main terms used in this Notice are explained in the Glossary. 1.2 Transitional arrangements for bookmakers transferring to the OGRA regime Licensed bookmakers regulated under OGRA were advised in writing in August 2007 that - calculation of gross gaming yield for fixed-odds bets is carried out in the same way as that for net stakes receipts used to determine how much general betting duty was due; under the OGRA regime it made no difference to the duty-rate where the customer was located; carried forward losses would be permitted in the same way as under the general betting duty regime; operators separately licensed but owned or controlled by the same person may have their duty liabilities aggregated; the concession allowing free and discounted bets to be omitted from duty calculations applied to all bookmakers. 1.3 Can an operator advertise in the UK? The Treasury understands that current UK law does not prevent operators licensed under OGRA from advertising and taking bets in the UK. 2.1 What is online gambling? About the duty Online gambling is defined in section 1 of the Online Gambling Regulation Act 2001 as being - a. any gaming, where any player enters or may enter the game, or takes or may take any step in the game, by means of telecommunication, 10

11 b. the negotiating or receiving of any bet by means of a telecommunication, or c. any lottery in which any participant acquires or may acquire a chance by means of a telecommunication. A person is said to conduct online gambling where - a. in the case of gaming or a lottery, he takes part in its organisation, management or promotion; b. in the case of a bet, he carries on any business involving the negotiating or receiving of the bet; or c. he maintains, or permits to be maintained, in the Island any computer or other device on or by means of which the game or lottery is operated, or the bet is received, as the case may be. A service provider shall not be treated as conducting online gambling by reason only that, in the course of a business, he handles electronic communications on behalf of another person with whom he is not associated. For the purposes of online gambling duty, the Treasury regards online gambling to be anything conducted under a licence issued under the 2001 Act, or anything that requires such a licence. Many different types of gambling can be offered under a licence, but those specifically excluded would include - a. betting with a licensed bookmaker through a betting shop in the Island and where the bookmaker and the premises are not required to be licensed under OGRA - these bets being liable to general betting duty; b. games conducted under a National Lottery licence. 2.3 What is online gambling duty? It is a duty of excise, administered and collected by the Customs and Excise Division of the Treasury. It is a duty on the prescribed proportion of the profit (the gross gaming yield or retained profit ) made by an operator on any online gambling conducted pursuant to the licence in such periods as are prescribed. The profit may be from any type of gambling undertaken by an operator, and would be from anything conducted under a licence issued under the 2001 Act, or anything that requires such a licence. Online means any gambling involving use of any form of telecommunications (i.e. by internet, , telephone etc). Liability is determined by means of either - a. the gross gaming yield, or b. the retained profit made by the operator. If you are proposing applying for a licence to conduct online gambling in the Island you are advised to contact Customs and Excise in advance in order to set out the nature of the intended operation, in order that its liability to duty can be discussed. 11

12 2.4 What is gross gaming yield? This is - the total amount of all bets or stakes made, and the price of all chances sold less the value of all winnings and prizes due, in the course of the online gambling during the monthly period in question. This is the default method for determining duty liability. Those types of games listed in paragraph 2.5 are liable to duty under the retained profits method. 2.5 What is retained profits? Retained profit is that profit accruing to the operator from the players of a game - in the form of commission, entrance fee or otherwise. The following types of game qualify for use of the retained profits method - prize draws, prize competitions or lotteries poker or other games where individual players play against one another using systems or facilities provided by the licence-holder sponsored pool betting and pari-mutuel betting which employs use of a totalisator or any form of pool betting (note that pool betting not involved in a sponsored pool betting system, and which would have been liable to pool betting duty prior to 1st September 2007 is liable to a higher rate of duty - see paragraph 6.17 below) betting exchanges bet-broker operations spread betting Bets made through an Island-based bet-broker are also liable to general betting duty, unless the operator is licensed under OGRA. Betting exchange operators, unless licensed under OGRA, are also liable to general betting duty on their operations, see section 11 below). See paragraph 2.7 below for guidance on how to determine duty liability using this method. 2.6 Is all online gambling in the Island liable to duty? Duty is due where (a) the bet, wager etc is - placed with, and/or accepted by, and/or negotiated with an operator who is licensed under OGRA (or is required to be), who is physically located 12

13 in the Isle of Man, or whose equipment is located in the Island. This includes any agent or intermediary; or (b) is where a bet/wager etc is co-mingled with others by a sponsored pool betting operator - see paragraph 6.7. A bet, wager etc creates a liability to duty even where the customer does not honour it. However, there are special concessions for the following types of operation - a. Disaster recovery/business continuity operators permitted by the Gambling Supervision Commissioners to make temporary use of authorised disaster recovery facilities do not have to account for duty on bets, wagers etc taken during use of those facilities during this temporary period. b. Transitional arrangements new operators in the process of re-locating to the Island need only pay duty on bets, wagers etc actually accepted (and/or the risk borne) in the Island. No duty would be due on test bets, or play for fun bets, where no stakes from punters are involved. c. New operators accounting periods newly-licensed operators may apply to the Collector for permission to use a period of more or less than 12 months for the purpose of calculating duty liability in order to align this calculation with their own accounting procedures. This first period may be between 6 and 18 months. Duty liability is determined in the usual way regardless of the number of months involved. Permission to use this concession must be confirmed in writing by the Collector. Where the game involved is in the form of a prize competition, prize draw or lottery the retained profit shall be determined at the end of the individual competition, draw or lottery; or, if sooner, within 6 months of the taking of the first chance by a player in the competition, draw or lottery concerned. 2.7 How do I determine my duty liability under the retained profits method? Retained profit is that profit accruing to the licence-holder from the players of a game, in the form of commission, entrance fee or otherwise. In calculating the retained profit operators may deduct the following from the amount used to determine their duty liability - affiliates revenue sharing payments; in pari-mutuel betting, where an operator has approval to operate rebate betting, the rebate to players and management fees paid to pool managers. 13

14 Operators may not deduct any amount for expenses, any benefit other than payment secured by the person by reason of paying his stake money, or for any other matter. In particular, deductions may not be made for - hosting and bandwidth costs; payment processing fees. Operators approved to use the retained profits method of calculating liability to duty may also exclude free plays provided to players. They may also, with the written approval of Customs and Excise, exclude any proportion of the stake allowed back to the player in return for a prescribed level of activity ( player bonuses ). Operators must - a. tell Customs and Excise the types of expenses they propose to deduct from the amount used to determine duty liability; and b. have agreement in writing from Customs and Excise for these deductions. 2.7A Can I make any deductions when determining my duty liability under the gross gaming yield method? Yes. Online bookmakers and other operators liable to pay duty under the standard gross gaming yield method may make deductions from the amount used to determine how much duty they must pay similar to those allowed to operators using the retained profits method. Operators may deduct the following from the amount used to determine their duty liability - affiliates revenue sharing payments. Operators may not deduct any amount for expenses, any benefit other than payment secured by the person by reason of paying his stake money, or for any other matter. In particular, deductions may not be made for - hosting and bandwidth costs; payment processing fees. Operators may also exclude free plays provided to players. They may also, with the written approval of Customs and Excise, exclude any proportion of the stake allowed back to the player in return for a prescribed level of activity ( player bonuses ). But operators must - a. tell Customs and Excise the types of expenses they propose to deduct from the amount used to determine duty liability; and b. have agreement in writing from Customs and Excise for these deductions. 2.8 Can I get repayments of duty if I lose on bets, wagers etc? As the duty due from an operator cannot be less than zero this means operators cannot seek repayments of duty. However, operators are permitted to offset losses in one period against their liability in the next (see paragraph 2.16 below). 14

15 2.9 Is online gambling by Island customers with operators in the UK liable to duty? These may create a liability to duty in the UK, which would be accounted for by an operator there. No additional online gambling duty is due in respect of such bets, wagers etc made by customers in the Island. However, any agent or intermediary in the Island may be liable to duty if they accept, negotiate or collect bets, wagers etc in the Island on behalf of an operator based elsewhere Who has to pay the duty? The operator. If the operator fails to pay the Treasury can seek to recover the amount due from other persons, such as the person responsible for the management of the business, or the director of a company that is the operator What is the rate of duty? At the time of publication of this Notice the duty-rates are as follows. Except for operators of pool betting (see paragraph 6.17 below), operators must pay the following prescribed proportion of their gross gaming yield or retained profit, as the case may be - On the first 20 million per annum 1.5% On the next 20 million per annum 0.5% On any amount in excess of 40 million per annum 0.1% These rates are the same as those for general betting duty paid by bookmakers. Operators of pool betting are liable to a duty-rate of 15%. You should check with the Advice Centre in case the rates have changed How do the tiered duty-rates work? Operators are liable to pay duty at each tiered rate, becoming liable to the next tiered rate only when the gross gaming yield has exceeded the ceiling for the previous rate. e.g. if an operator has a gross gaming yield of 21 million then the liability is 305,000, made up as follows % = 300,000 plus 1 0.5% = 5,000 The operator would then account for any further gross gaming yield at the 0.5% rate until the aggregate declared gross gaming yield exceeds 40 million in the year - when any yield over that would be liable to duty at 0.1%. Liability is calculated using a 12-month period starting with the first day of the calendar month (or other period allowed to be used) that the operator began accepting business liable to duty. e.g. if the operator commenced operations in March 2010, the year for calculating duty would run from 1st March 2010 to 28th February In deciding on the appropriate duty-rate, operators must add together the declared gross gaming yield for each month in the 12-month period. 15

16 Newly-licensed operators may exceptionally be permitted to have a non-standard period for their first year of operation - see paragraph 2.6 above When is the duty due? At the end of each accounting period all duty chargeable in respect of bets, wagers etc made in that period becomes due. An accounting period is a calendar month, and the relevant statement (duty return) must be received by Customs and Excise no later than the 15th day following the end of the accounting period to which it relates. Payment of the duty must accompany the return, unless some alternative has been agreed in writing by the Collector Can I deduct anything other than winnings? No. Unless you have specific agreements in writing from Customs and Excise, you may not deduct any amount for expenses, any benefit other than payment secured by the person by reason of paying his stake money, or for any other matter. See paragraph 2.7 above for the rules for operators whose duty liability is determined on the retained profits basis. See paragraph 2.15 below for treatment of bad debts and chargebacks Bad debts including chargebacks Operators who are able to provide evidence of bad debts or chargebacks of amounts of bets, wagers etc made by credit card may be allowed to offset such sums against their duty liability. Operators wishing to take advantage of this concession must - a. keep records of the bad debts and/or chargebacks, and evidence to support these records; b. produce said records and evidence to Customs and Excise when required to do so; c. include a breakdown of any bad debts or chargebacks with their period returns; and d. have approval in writing from Customs and Excise to offset bad debts and chargebacks. Please note that this is a concession, and that any operator who does not follow the requirements of this paragraph, or who otherwise abuses the concession, may have it withdrawn from them Can I carry forward losses? Where the calculation of duty liability gives a negative figure, this is shown on the duty return and may be carried forward to the following period and offset against the liability in the following month. If carrying forward the figure results in a negative result in the following month then this may again be carried forward Do I deduct just the money actually paid out to a winning customer? No. You may deduct those winnings due to the customer, including those held in an account for him and available on demand. 16

17 2.18 I accept bets, wagers etc passed on to me by other operators - what is their liability? See paragraphs 2.3 to 2.9 above. However, if the operator passing the bet, wager etc on to you has already accounted for duty in full on the original bet, wager etc then no further duty liability would normally arise. Where a bookmaker is accepting wholesale bets, i.e. bets hedged by other bookmakers, and there is no means of identifying the location of the original customer, then the location of the latter bookmaker may be regarded to be the location of the customer for the purposes of determining duty liability What about free bets and player bonuses? Where bets, wagers etc are offered to players and do not require payment from the player ( free bets ) then these should not be included in an operator s duty calculation. Operators using the retained profits method of calculating liability to duty may also exclude free plays provided to players. They may also, with the written approval of Customs and Excise, exclude any proportion of the stake allowed back to the player in return for a prescribed level of activity ( player bonuses ). Notification and Security 3.1 Must I tell anyone before I start business? Yes. Except for any operator making use of the disaster recovery exemption, you should inform the Advice Centre in writing at least one week before you start business. The Advice Centre will allocate you a unique trader reference number. Quote this number whenever you contact Customs and Excise. You will also need a licence issued by the Gambling Supervision Commissioners before you take any bets, wagers etc. Any licence application will be referred to both the Collector of Customs and Excise and the Chief Constable. 3.2 What rules and regulations govern the operation of my premises? You should contact the Gambling Supervision Commissioners who will advise you of their legal requirements with regard to your premises. 3.3 Do I need to pay security? Customs and Excise does not normally require security for duty. 3.4 What happens if I cease trading? You must inform the Advice Centre as soon as you know your last day of trading. If you cease trading for more than 28 days, and the end of 30 days from the date of ceasing to trade you must have paid to Customs and Excise any duty you owe. You should also advise the Gambling Supervision Commissioners. 17

18 Returns, Accounts and Records 4.1 Must I keep a record of bets, wagers etc received? Yes. You must maintain full and accurate records of bets, wagers etc received, winnings paid out or awaiting payout, and any other details necessary to determine your duty liability in accordance with section 2 above. These records and/or access to them must be made available to officers upon request. 4.2 Must I keep a duty account? Yes. 4.3 How do I pay the duty? You must do this at the end of each accounting period, using the return supplied to you. You may pay by cash, by cheque, debit card, or by bank giro credit. If you intend using the latter method you must agree this with the Advice Centre in advance, and quote your unique trader reference number on any reference document etc. If you send a cheque to the Advice Centre without a return or reference document, please ensure you endorse it with your unique trader reference number and the reason for the payment. 4.4 Who supplies the returns? The Advice Centre will issue the return to you in sufficient time for you to be in possession of a valid Authority for each accounting period. If you lose or do not receive a return ask the Advice Centre for a replacement immediately. 4.5 When must I fill in my return? You must do this at the end of each period the return covers. Send it with full payment of the duty to reach the Collector, Isle of Man Customs and Excise, PO Box 6, Custom House, Douglas, Isle of Man, IM99 1AG by the 15th of the month following the end of the period. You must complete and send the return in even when you have not carried on business during the month covered by it. Nil returns are required, i.e. you must submit the return even if you do not have to pay any duty for that period. Late or non-payment could also result in the duty being assessed, and the debt enforced as if the assessment were the actual duty due. It could also result in civil penalties being raised against you. If you intend to pay by BACS or other form of credit transfer you must obtain the prior permission of Customs and Excise. 4.6 How long must I keep my records? 3 years. You should keep all records at your main business address on the Island, as notified to Customs and Excise. You may be allowed to keep them elsewhere if you apply to the Advice Centre in writing. 18

19 4.7 Can I apply for non-standard accounting periods? Exceptionally Customs and Excise may allow non-standard accounting periods. Use of these must be authorised in writing by Customs and Excise. You need to make any such application in writing to the Advice Centre, stating the periods you wish to use and the reasons why you wish to use them. If your commercial accounting periods are based on non-standard months you may ask to have your duty returns match these. Accounting periods of longer than 60 days would not be permitted. Legal Powers and Penalties 5.1 What are the legal powers of Customs and Excise? Customs and Excise officers have powers which allow them to - enter any premises used for the purpose of a online gambling business; remain on those premises so long as they have reasonable cause to believe that the premises may be used for the purpose of carrying on that business; issue an assessment where duty has not been declared, has been under-declared, or where a return has not been submitted; direct what records and accounts are to be kept; inspect any books, records and accounts kept, including any documents which relate or appear to relate to the business, including business bank accounts and annual accounts; take copies of any books, records, accounts or other documents relating to the duty and to require you to furnish such information and assistance as the officer may require; and where there is evidence of fraud, make arrests. 5.2 What are the penalties for offences? For obstructing officers, making false statements and fraudulent evasion, the penalties include imprisonment. Failure to pay duty due could result in civil penalties, or the seizure, appraisal and disposal of your assets to recover it. Fraudulent evasion of an excise duty, such as online gambling duty, is a serious criminal offence with severe penalties including imprisonment. Customs and Excise may also apply for the forfeiture and cancellation of your licence, or object to its renewal, if you fail to pay duty due, or fail to comply with other requirements placed upon you. 5.3 What if I am unhappy with the way I have been treated by Customs and Excise? See section 8 of this Notice. 5.4 Recovering unpaid duty Customs and Excise can assess unpaid duty where unpaid or underpaid. Any assessment, and any associated penalties and interest, may be collected as duty due. The Treasury can take civil proceedings for the recovery of a duty debt from the operator, the 19

20 holder of a licence, companies and their directors, and persons responsible for the management of businesses or premises at which the bets, wager etc were taken. Customs and Excise may also apply to the Gambling Supervision Commission for the forfeiture and cancellation of a licence, or could object to any renewal of either, if you fail to pay duty due. Customs and Excise can also levy distress for the recovery of duty under the Distress for Customs and Excise Duties and Other Indirect Taxes Regulations This means it could seize assets of an operator to sell to settle the debt. In any case, failure to pay duty or submit duty returns could result in civil penalties, including fixed daily penalties. Where fraud is proved, confiscation of the proceeds can be ordered by the court. Particular Types of Gambling 6.1 What rules cover wholesale, hedged or laid-off bets, wagers etc? See section 2 above. Where an operator is accepting wholesale bets, i.e. bets hedged or passed on by other bookmakers, affiliates etc, and there is no means of identifying the location of the original customer, then the location of the other bookmaker, affiliate etc may be regarded to be the location of the customer. 6.2 Is duty due on commission or discount? Operators receiving bets through affiliates may be allowed to treat payments back to affiliates as winnings for the purpose of their duty liability (see section 2 above). Permission in writing from Customs and Excise to do so would be required. Operators using the retained profits method of determining duty liability (see section 2 above) must include any commission or other payment they receive from third parties that relate to the bets, wagers etc received. 6.3 Is duty due on void bets, wagers etc? Yes. 6.4 Is duty chargeable on free or discounted bets, wagers etc? Yes. But see section 2 for more details. 6.5 What is spread betting? Spread betting involves betting on the outcome of a financial, sporting or other event, based on the spread quoted by the bookmaker. Customers can choose to buy at the top of the spread, or sell at the bottom. Winnings and losses are calculated by reference to the unit stake times the difference between the final total and the buying or selling price. You should note that spread betting may be considered to be investment business and may require a licence from the Financial Supervision Commission (who you should contact before taking, or offering to take, any spread bet). 6.6 What is the liability of spread betting? If licensed under OGRA spread betting would be eligible for the retained profits basis of 20