Budget tax threat halts Sportingbet's plan for 'exchange'

Sportingbet, the online gambling group, has halted plans to launch a betting exchange after Gordon Brown announced a clampdown on the controversial websites.

Exchanges, most notably Betfair, have vastly increased the competition for traditional high street and online bookmakers, based on claims that they offer substantially better odds.

Sportingbet had been conducting trials of its own exchange in a bid to compete, but it has put the scheme on hold following a Budget Day announcement that the tax treatment of exchanges is to be reviewed.

Customs & Excise has been ordered to look at whether some or all users of exchanges should pay tax on their winnings.

Mark Blandford, the founder and deputy chairman of Sportingbet, urged Customs & Excise to conduct its review speedily. "We have trialled an exchange and in light of the Budget statement we have put that on hold," he said. "I would be very disappointed if this dragged on into next year, because we want clarity in terms of competition."

Internet exchanges allow punters to offer their own odds directly to other users: a practice known as laying a bet. This allows the layer to bet on a horse to lose, rather than to win, and critics say this encourages foul play by making it easy to profit if a jockey throws a race.

Others in the betting industry argue that it turns the layer into a bookmaker, and heavy users should be licensed and taxed as such.

Betfair, based in London, accounts for about 90 per cent of Britain's exchange-based bets and is thought to have a weekly turnover of about £50m from 200,000 users. Rivals include Betdaq, Sporting Options and BackAndLay.

The creation of a betting exchange would be an intriguing next step for Sportingbet - which last week appointed Bob Holt, the chairman of the building maintenance group Mears and one of the most prolific small company directors, as non-executive.

The company was the first in the UK to offer tax-free betting on the internet, and has since grown through acquisition and by branching out into other areas of internet gambling, such as online casinos.