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GC Consults on New Licence Fees to Take Effect in 2017

The Gambling Commission is consulting on proposed new licensing fees set to come into force next spring.

This consultation follows on from the publication by the Commission of its fees discussion paper on 1 September 2015 and a workshop for stakeholders on 24 September. The Commission sees a review of its fees structure as timely after the implementation of the Gambling (Licensing and Advertising) Act 2014 increased the volume of gambling it regulates (excluding the National Lottery) from around £6.7bn to approximately £9.3bn.

The consultation is open until 9 September and full details may be found here:

It should be noted that responses must be sent to both the Commission and the DCMS.

The main proposals, in summary:

  • Take into account the changes in the Commission’s costs and income following the coming into force of the 2014 Act;
  • Would result in a reduction of 10% in fees, £1.7m, across the gambling sector as a whole;
  • Tweak the fees applicable to various sizes and types of operator to ensure, the Commission says, proportionate recovery;
  • Replace number of premises with gross gambling yield (“GGY”) for various types of non-remote operator as the means of calculating fees;
  • Re-align cost recovery more proportionately, in the Commission’s view, with reference to GGY;
  • Sub-divide various fee categories into smaller sub-categories to promote fairness; and
  • Address other issues that have been identified in the current fees structure.

The Commission expects the proposed changes to come into effect on 6 April 2017. It will be holding a workshop for trade associations in Birmingham in September.

The Commission estimates that, as a result of the changes, around 1900 operators will benefit from a fees reduction, 1,000 will see fees held at current levels, while fewer than 100 will face an increase.

The GC has found that its fees income is, and will continue to be, in excess of its operational costs and this contravenes the principle of reasonable costs recovery enshrined in HM Treasury’s July 2013 Managing Public Money. These proposals therefore seek to address this imbalance by decreasing revenues (on the GC’s estimates) by around 10%.

One key proposal is to move several additional sectors across to GGY as the metric for determining both application and annual fees. It is suggested that this will apply to non-remote bingo, general betting (standard), adult gaming and family entertainment centres, as well as to 2005 Act casinos (which are currently charged by reason of the licence they hold, namely small or large). The Commission considers that it now has more reliable GGY data from operators than when the licence fees were originally set and that the new basis for calculation will be fairer, and more accurately reflect operators’ regulatory risk and cost burden.

The Commission also proposes sub-dividing a number of fee bands, in particular those for smaller operators, to “smooth out” the transition from one fee band to the next, thus enabling gambling businesses to grow without seeing a huge “hike” in fees. This is obviously a welcome move. Similarly, there is a suggestion that some of the largest fee bands will be sub-divided and that “fee formulae” will be introduced, based on turnover, for certain of the highest fee categories, such as machine technical and gambling software licences. This, the Commission say, will ensure an equitable recovery of costs when larger operators expand or merge with, or acquire, smaller businesses. It also plans to address the fees for general betting standard (real events) and remote betting intermediary operators, so that the smaller players pay less, whilst the bigger operators pay more.

Other proposed changes include slashing the variation fee for operators when they move up a fee band to a fixed fee of £25, rather than the current payment of 20% of the usual payment for the activity in question. This represents a very significant reduction in many cases. The Commission is also proposing reducing the charge for a change of corporate control declaration application where shares are transferred to a family member by a small, family-owned company from the current fee of 75% of the usual application fee for the activities authorised by the licence to a fixed fee of £100. Again, this would bring about a significant discount. The current requirement to pay £25 when a licensee changes his, her or its name is proposed to be scrapped and this, in the future, will attract no charge. This will particularly benefit female holders of operating licences who are obliged to apply for a change of name when they marry or divorce.

Many gambling software providers would benefit from the proposal to introduce a new category of remote operating licence for B2B providers who host their own remote casino and bingo games through another remote casino or bingo operator, but do not, themselves, transact with customers. Under the new arrangements, such operators would continue to need to hold a gambling software licence, but would only need the new operating licence, rather than a full bingo or casino operating licence, as is currently the case. This seems sensible to me given that most of the requirements relating to social responsibility, cash handling, protection of customer funds and so on that apply to B2C businesses simply are not relevant in the case of B2B businesses. I have long thought that the requirement to hold a full licence does not sit well with those entities and on several occasions this has resulted in simply responding “not applicable” to requests from the Commission for policies and procedures when making operating licence applications on behalf of the clients concerned.

Scrutiny of the Commission’s figures reveals a decrease in fees for just about every category of operator. The notable exception is the lottery sector, so the Commission’s view on that bears some further scrutiny.

The proposal for over 500 society lottery operators and ELMs is to hold fees at current levels. The GC makes the point that fees have been held at the same levels since 2009 (and indeed, since 2007 for most such operators), so continuing to hold them at current levels still represents a significant reduction in real terms.

The Commission points to the increase in fees for External Lottery Managers (“ELMs”) as part of the 2012 fees implementation and considers that these remain at the right level given the increasing influence of ELMs in the lottery market and their role in introducing significant developments in the kinds of product available. It also refers to the introduction of an ancillary licence for society lotteries (as a result of the 2011/12 fees consultation) that take payment via remote means up to a value of £250,000 per annum. This reduced annual fees for many society lotteries by around 30% and up to 60% for the very smallest lotteries as previously they had been required to a hold a full remote licence. The Commission therefore believes that the maintenance of the current fees levels for lotteries is appropriate although it says that it may have to review society lottery fees again once it has completed its current review of the sector. This will no doubt disappoint many in the lottery market, particularly ELMs, and I and my lottery clients shall await the outcome of any further fees review with interest.

One area of suggested change that some society lottery and ELM licence holders may benefit from, however, is the proposal to introduce annual fee discounts for the holders of two operating licences. Currently, such licence holders receive a 5% discount on the cheaper of the two licences they hold, whether it be remote or non-remote. It is proposed to apply that discount to every licence activity on both licences.

The proposed fee changes are intricate in places and this piece does not set them out in full. Should you require any advice on them, or assistance with responding to the consultation paper, please contact one of the team.