Flutter Entertainment has relocated Sky Bet’s headquarters to Malta amid widespread speculation about the impact of UK tax changes.

ITV News reported yesterday Sky Bet workers across seven cities, including three UK ones, were told via a video meeting earlier this year that the company was moving its HQ to Malta.

The company has now confirmed to SBC News that a relocation was initiated in June this year, citing the long-running debate around tax and the intricacies of the Gambling Act review, which concluded in 2023 after starting in December 2020.

However, Flutter added that although a number of ‘commercial and marketing roles’ were moved to Malta during the summer, it remains an active employer in the UK with centres in London, Leeds and Sunderland.

Sky Bet – bookmaker brand of Sky Betting and Gaming alongside Sky Vegas, Sky Casino, Sky Poker and Sky Bingo brands – has been headquartered in Leeds, West Yorkshire, since 2010. Despite some redundancies at its Leeds HQ, it remains a considerable tech employer in the city.

Flutter’s statement explained: “Flutter paid more than £700m in taxes to HMRC last year and we employ over 5,000 people across the UK including almost 2,000 in Leeds and 600 in Sunderland.

“As with most global businesses around the world, we are constantly striving to remain competitive and efficient and to give ourselves the best chance of success in an incredibly challenging environment.”

What challenges does Sky Bet face?

While ITV News’ article has focused chiefly on taxation, the difficulties Sky Bet and other UK licensed operators have been facing go back by at least four years.

The Gambling Act review, lasting two and half years between December 2020 and April 2023, was a period of great regulatory uncertainty for the sector.

As one of the UK’s largest online bookmakers, Sky Bet will still have to adhere to conditions of the Gambling Act review White Paper like the ban on cross-selling bonuses and the sponsorship Code of Conduct despite its Malta relocation.

However, the company clearly sees the UK as hosting a difficult operating environment for the upper echelons of its business amid ongoing regulatory changes – the conditions of the 2023 White Paper still being adopted and adjusted to – and the often heated and widely speculative debate around taxation.

Sky Bet has also cited growing competition from black market betting firms – offshore betting websites that do not have a UK Gambling Commission (UKGC) licence.

The presence of these firms has been routinely cited by the industry as an example of the negative impacts of over-taxation and over-regulation, but it seems that policymakers have become numb to the argument – having heard the case for over four years now.

“The challenge we face is only made harder by the recent Gambling Act Review, the significant rise of illegal, unregulated black-market competitors and the possibility of tax rises in the Budget,” Flutter’s statement continued.

“In June this year, after migrating Sky Bet onto the same technology platform as our other brands, we decided to move a number of commercial and marketing roles to our commercial centre in Malta – where Flutter already employs over 750 people.”

Cost cutting underway

Rachel Reeves, Chancellor of the Exchequer in the Labour government, will announce the Autumn Budget next week on Wednesday 26 November – an unusually late budget coming very close to Christmas, with the statement usually made in October or early November.

An increase in gambling taxes is widely expected. Some such as former PM and Chancellor, Gordon Brown, have argued that an increase in gaming taxes can be used to cut the two child limit on childcare benefit allowances, in doing so reducing the UK’s childhood poverty rate.

Initially, HM Treasury began consulting on a potential merger or harmonisation of three types of gaming duty – 21% Remote Gaming Duty (RGD) on online gambling, 15% General Betting Duty (GBD) on all forms of gambling, and 15% Pool Betting Duty (PBD) on horse and dog racing bets – to one single 21% rate.

However, after extensive lobbying from both betting and horse racing, with the latter going on strike in September, reports have circulated that the Treasury is going to leave racing out of any tax increases.

This would place the heavier tax on online gaming and slot games, the latter taxed by Machine Gaming Duty (MGD). Another scenario, one which has got bookmakers far more concerned, is that MGD will rise from 20% to 50% and RGD from 21% to 40%.

Regardless of either scenario, operators will be footing more of a bill – and will be looking at ways to reduce this bill, whether by cutting marketing expenses, reducing headcounts, or looking at alternative locations. According to Tax Policy Associates, Sky Bet will reduce its tax bill by £55m by moving to Malta, which has a tax rate of 5%.

Flutter’s statement concluded: “This decision was made for a number of strategic and commercial reasons and will have some tax implications. But Flutter is committed to the UK and Sky Bet will continue to pay UK corporation tax on its profits.”

The international business of iGaming

The relocation of a prominent British betting firm, Sky Bet, to Malta shows that the island’s status as a Europe iGaming hub remains steady, despite some new challenges emerging and some international regulatory arguments around its ‘Bill 55’ protectionist legislation.

Betting and gaming accounts for around one-tenth of Malta’s economic output, and attracting new companies to the territory is always welcome for its government. In contrast, Sky Bet’s new expat status may serve as a warning to the UK, and its overseas territory Gibraltar.

Gibraltar’s authorities have expressed some concern about the impact tax raises could have both on its economy and on that of the UK. British politicians, meanwhile, have taken note of how many UK-founded iGaming firms pursue a domicile in low-tax Gibraltar.

“Gibraltar is part of the British family and any UK tax rise is amplified in Gibraltar because UK regulated gambling is a key pillar of the economy,” wrote Andrew Lyman, Gambling Commissioner with the Gibraltar government, on LinkedIn earlier this month.

“Gibraltar-based, UK-facing firms pay £750m to the UK exchequer in gambling taxes (on a point of consumption basis). UK-facing, Gibraltar-based operators are dual regulated.”

An exodus of firms from the UK and Gibraltar is purely speculative at this point. However, stakeholders in Malta may be watching in interest – but they may not be alone. Estonia is also eyeing up status as an iGaming hub, setting a tax rate even lower than Malta’s at 4% recently while also penning draft legislation.

The sudden departure of firms from the UK, Europe’s biggest gaming market, searching for a new home could be the boost Estonia needs, if it can attract them away from the traditional heartland of Malta.