Ladbrokes ends tax-free deal

Ladbrokes has signalled the end of the tax-free honeymoon for online gamblers with the imposition of a 5 per cent duty on domestic internet bets.

Ladbrokes has signalled the end of the tax-free honeymoon for online gamblers with the imposition of a 5 per cent duty on domestic internet bets.

Although William Hill and Coral's Eurobet arm are continuing to offer a tax-free online service, Ladbrokes' peers are expected to follow its example. Blue Square, another online operator, charges 2.5 per cent.

Ladbrokes' change of policy, which came into effect on Thursday, reflects the severe competitiveness which has inhibited the profitability of on-line bookmakers. Until now, Hilton's betting arm has been financing the entire 6.75 per cent levy on its customers' behalf. Bookmakers have been willing to run these services at a loss in a bid to corner a market which is expected to grow exponentially in coming years. Even with a 5 per cent charge, Ladbrokes' service still represents a 1.75 per cent saving on high-street betting shops.

John O'Reilly, managing director of Ladbrokes' e-gaming, said: "No bookmaker would tell you that they could swallow the tax in perpetuity. The margins in this business are not that significant and if you then have to swallow the tax, you just haven't got a business."

A spokesman for William Hill said that the company had no plans to pass on the tax but refused to rule out an imposition in the future. Analysts believe that bookmakers with profitable bricks and mortar operations, such as William Hill and Ladbrokes, are more likely to survive in the cut-throat, online market than stand-alone internet businesses.