Gambling operator gets windfall in free spin tax case

The case centred on the taxable status of a free, promotional spin offered by gaming operator Jumpman Gaming Ltd which HM Revenue and Customs (HMRC) argued should be taxed.

In the UK, gambling operators are required to pay remote gaming duty (RGD) on the gaming profits on all forms of gaming that are accessed remotely. The tax is charged on the profits in relation to UK players – at 21% up until 1 April 2026 and at 40% after this date.

Since 1 August 2017, special rules were put in place in relation to freeplays, including spins and bonus credits, under the Finance Act 2017.

Section 159(4) of the Finance Act 2014 regards certain freeplay participation as involving a gaming payment, while s159A excludes certain later participation from being taxed.

HMRC accepted that Jumpman’s initial ‘Mega Reel’ spin offer was exempt from tax, but assessed all subsequent spins won following the promotional game as subject to RGD. It argued that a further free spin could only be excluded by s159A(4) if the spin had been won from an earlier game where the payment had been waived.

HMRC also argued that if the ‘welcome spin’ wasn’t a waived payment game, the subsequent free spins that had been won could not be traced back to a waived payment game, meaning that they fell outside of the exclusion cited in s159A(4) and therefore should be taxable.

This left Jumpman liable to pay £13.2 million in RGD for the accounting periods between 1 July 2018 and 31 December 2022. It appealed to the First-tier Tribunal (FTT), which examined the treatment of free spins awarded and used under the welcome offer.

In September 2025, the FTT ruled that it accepted HMRC's interpretation of the provisions and dismissed the appeal. However, Jumpman then appealed the decision to the Upper Tribunal, arguing that further free spins should be excluded by s159A(4) and that the court had not interpreted the provisions and their application to subsequent freeplay games correctly.

The Upper Tribunal upheld some aspects of the FTT’s reasoning but concluded ultimately that the FTT had made a material misinterpretation of the law. It ruled that the awarded free spins fell within the statutory exclusion and did not give rise to RGD, meaning that none of the free spins in question should have been taxable. It also concluded that consultation materials that preceded the rule changes for free plays introduced in 2017 should have been considered as part of the appeal.

The decision overturns the FTT’s earlier ruling and, in a surprising outcome, leaves Jumpman with no RGD to pay at all. Bryn Reynolds, a VAT expert at Pinsent Masons, said the Upper Tribunal’s decision was “very surprising” and appeared “to defeat the purpose of the 2017 amendments.”

He said the case also raised some interesting questions for other gaming operators. “After a similar loss in the insurance sector, HMRC decided to change the underlying legislation and I would expect a similar response here as every operator will currently be revisiting their arrangements to implement this model.”

It is unclear at this stage if HMRC will appeal. Given the facts of the case, Reynolds said this could be challenging: “It will be very interesting to see if HMRC appeals. It can be expected to challenge the UT's conclusions on the later spins. Having successfully argued that the initial spin was not subject to tax, it would seem difficult to now try and adopt the position that it is taxable.”

Scott Oxley, a prize competition expert with Pinsent Masons, said the tax implications of the decision could be far-reaching: “The broader lesson is not about free spins at all,” he said. “For businesses running prize draws, competitions and other promotional campaigns, the tax treatment of those mechanics often turns on the detailed operation of the promotion and the precise wording of the relevant legislation. As recent HMRC activity in the prize draw sector demonstrates, areas that have historically attracted limited scrutiny can quickly become a focus of attention where significant tax revenues are involved.”

The decision comes as the UK’s booming prize draw sector is under increasing tax scrutiny. HMRC has recently been engaging with operators regarding the VAT treatment of prize draw arrangements, prompting many operators to review their historic and ongoing tax positions.

Oxley said the decision highlighted the importance of ensuring that the tax treatment of promotional mechanics is tested against the legislation itself rather than assumptions about the intended policy outcome.