In an effort to register, regulate and, above all, tax street bookmakers, then Chancellor of the Exchequer, Winston Churchill, originally imposed betting tax in his Spring Budget in 1926. Beforehand, Churchill had, by his own admission, entertained the ‘gravest doubts’ about the proposal and those doubts proved to be well founded.
Betting tax proved difficult to implement, estimated revenue failed to materialise and the racing community reacted, almost unanimously, with disgruntlement. On-course bookmakers went on strike, Newmarket trainers collectively signed a petition objecting to the tax and its detrimental effect on racecourse attendances and, when two subsequent cuts to the tax rate failed to quell the outcry, Churchill was forced to scrap the scheme the scheme altogether in 1930.
Fast forward three decades and another Conservative government, under Harold Macmillan, enacted the Betting and Gaming Act, 1960, which, in turn, led to the legalisation of cash betting in licensed bettings shops on May 1, 1961. Five years later, the Labour Government, under Harold Wilson, reintroduced betting tax on horse racing, at a rate of 2%, on all bets placed with bookmakers.
Betting tax remained in place, in one form or another, until January 1, 2002. The previous March, Labour Chancellor Gordon Brown had announced a major overhaul of the betting duty system; out went the previous betting duty of 6.75%, based on turnover, and in came a new tax, of 15%, based on gross profits. Unlike the previous system, bookmakers could absorb the cost of the new tax, in its entirety, rather than passing it on to off-course punters as a 9% tax, payable on stake money or winnings. Notwithstanding a potential increase in general betting duty to bring it into line with remote gaming duty, set at 21%, on which the government is currently consulting, gambling winnings remain tax-free, even in eyes of HM Revenue & Customs.