“A betting exchange business offers three advantages to betters as follows: Because the betting exchange does not enter into any bet itself, it does not have to enter into the complex process of calculating odds on the outcome of a sporting event. The odds are purely a matter for the respective betters, the backer and the layer. This saves the betting exchange very substantial costs and means that it can provide the service at a very significantly lower net cost than traditional bookmakers. A better has the option of being a layer as well as a backer. With a traditional bookmaker, the better can be only a backer. Once a bet has been entered into between a backer and a layer on a betting exchange service, either party may then seek to trade his position as the odds change. For example, if a backer bets£10 that Horse A will win a race at odds of 2 to 1, he may subsequently be able to lay (that is bet against) the same amount on the same horse at shorter odds, of say 6 to 4. If the horse wins, he receives£20 for the bet where he was a backer and pays£15 for the bet where he was a layer, meaning that he wins£5 overall. Conversely, if the horse loses, he makes and loses£10 so he breaks even overall. Typically, an individual may enter into a number of individual bets on one aspect of the outcome of a sporting event. This process in itself adds to the challenge and excitement of betting for some betters.”
“6. Be the Bookie: Sporting Options has a ‘Be the Bookie’ feature that allows you to ‘lay’ multiple bets in a single process. To use this facility you would select your maximum payout and your odds for each selection in a betting market. ‘Be the Bookie’ will automatically calculate the various backers stakes you would need to ‘lay’ in order to achieve a proportionate set of prices. The system also calculates the guaranteed percentage return associated with your chosen prices. Please see the ‘Betting Help’ for a more detailed description of Be the Bookie.” 8. Liquidity: Betting ‘liquidity’ or betting volume is vital to the success of a betting exchange. Sporting Options has carried out months of negotiations with several key groups of liquidity providers. These groups include numerous independent bookmakers both on and off-course, several on-line bookmakers, and many former City of London colleagues who enjoy trading sporting and financial markets on a regular basis.”
“The disadvantage for a betting exchange to betters is that sometimes there may not - at any one time - be a counterpart better prepared to take a particular bet (a backer may not be able to find a layer or vice versa). By contrast, a bookmaker will always be prepared to accept a bet, albeit only at the odds he sets. This disadvantage is particularly acute with a small betting exchange business which has fewer members. This is one reason why any betting exchange starting up seeks to build up a substantial subscriber base as soon as possible.”
“A further category of bookmaker is the companies that engage in spread betting. Spread betting involves betting on the outcome of a financial or sporting event based on a “spread” quoted by the bookmaker. The “spread” is a range of values (say, a range of between 150 and 200 runs for a cricket team score). The customer chooses whether they predict that the actual outcome will be above or below that spread. If they predict it will be above the spread then they “buy” at the top of the spread by staking an amount on the score being above the spread. If the customer is right and the end total is above the spread upper limit (in my example, if more than 200 runs are scored), the customer wins an amount which is equal to the value of their stake multiplied by the difference between the final total and the upper limit of the spread (in my example, if the score was 250 runs, the winnings would be 50 multiplied by the value of the stake). If on the other hand the customer is wrong, then, conversely, they pay an amount equal to their stake multiplied by the difference between the top of the spread and the actual total. The same principles apply (but in reverse), if the customer predicts that the outcome will be below the spread in which case they “sell” at the bottom of the spread. The customer can also sell his “bet” during the course of a game, before the final total is ascertained (e.g. before the end of the cricket team’s innings) for a market price which will reflect how far above or below the spread the final total appears to be reaching.”
“bookmaker” means any person other then the Totalisator Board who -- (a) whether on his own account or as servant or agent to any other person, carries on, whether occasionally or regularly, the business of receiving or negotiating bets or conducting pool betting operations; ..”
“(1) There shall be a Horserace Betting Levy Board (in this Act referred to as ‘the Levy Board’) which shall be charged with the duty of assessing and collecting in accordance with the subsequent provisions of this Part of this Act, and of applying, subject to those provisions, for purposes conducive to any one or more of the following, that is to say— (a) the improvement of breeds of horses; (b) the advancement or encouragement of veterinary science or veterinary education; (c) the improvement of horse racing, monetary contributions from bookmakers and the Totalisator Board. (2) The Levy Board shall consist of a chairman and seven other members of whom: (a) the chairman and two other members shall be appointed by the Secretary of State and be persons who the Secretary of State is satisfied have no interests connected with horse racing which might hinder them from discharging their functions as members of the Board in an impartial manner; (b) three members shall be appointed by the Jockey Club (incorporating the National Hunt Committee); (d) one member shall be the chairman for the time being of the Bookmakers’ Committee; and (e) one member shall be the chairman for the time being of the Totalisator Board.”
“(a) two shall be appointed by Coral Racing Ltd; (b) two shall be appointed by Ladbroke Racing Ltd; (c) two shall be appointed by William Hill Organisation Ltd; (d) two shall be appointed by the Betting Office Licensees Association Ltd to represent the interests of the members of that body other than those listed in paragraphs (a) to (c) above; (e) two shall be appointed by the National Association of Bookmakers Ltd from amongst persons nominated for the purpose by associations for the time being affiliated to the National Association of Bookmakers Ltd; and (f) two shall be appointed by the British Betting Office Association Ltd.”
“... the Committee has a statutory responsibility to make recommendations on behalf of the industry as a whole and as Chairman, I am conscious of the requirement for the Committee’s recommendations to be based on a detailed and balanced assessment of what is a fair and reasonable contribution from each sector of the industry.”
“Two major factors have emerged. There is no doubt that the increasing popularity of alternative products, including the Football World Cup, have played their part. However, we believe the main reason to be that horseracing gross win across all platforms is running at about 1% less than we might have expected, almost certainly because money which might otherwise have been channelled through these platforms is being diverted through the betting exchanges. This effect has become much more pronounced since Betfair and Flutter.com merged earlier this year. … It is a fact that the on-course market is being influenced by some bookmakers laying off their liabilities through the exchanges, thus enabling them to sustain a bigger price about a horse than the local market can justify. The effect is to reduce the off-course margin by artificially inflating the SP. … A further effect of diverting money through the betting exchanges is to reduce the amount of revenue which that money would otherwise have generated for the levy and for racing. This is because the gross profit margin on which the exchanges pay levy is very much lower than that of a commercial bookmaker. If we assume that the exchanges charge, on average, 4% commission and that this is their sole source of income, then their gross profit margin is 4%; this compares with a combined average margin of around 12.5% across the LBO, telephone and internet channels of other bookmakers. If£1.3M in levy is derived from 10% of a 4% margin, it follows that up to an additional£2.76M would have been payable had that money been channelled through the conventional platforms. If the betting exchange gross margin were 3%, up to£4.1M extra would have been payable. It is therefore likely that between£3M and£4M of the theoretical£6M deficit is directly attributable to the diversion of money through the exchanges. Alternatively, it is arguable that the whole shortfall is due to the reduction in overall margin resulting from the activities of the betting exchanges. The Committee will be seeking to alleviate the negative effect on the levy and the income to racing in general which the betting exchanges are having by making recommendations which address the liability of those who profit by laying bets through the exchanges, as well as that of the exchanges themselves.”
“Generally, the first recommendations are submitted by the Bookmakers’ Committee in September and these are considered by the HBLB at its board meeting in September. It is fair to say that it is not usual for these to be accepted by the HBLB. The Bookmakers’ Committee will then usually submit revised recommendations which will be considered by the HBLB at its board meeting in October. These too are often not approved and it has not infrequently been the case that only on 31 October itself are the recommendations in a final form which the HBLB feels able to approve.”
“Uniquely, representatives of the Committee have been in dialogue with members of senior management at the British Horseracing Board during the drafting process and we believe that the attached document accurately reflects the agreements which have been reached between the two bodies.”
“(iii) Betting Exchanges/Bet-Brokers. The Committee recommends that companies who derive their gross profits from operating betting exchanges or conducting bet-broking activities, should pay 10% of such gross profit in levy, where that profit arises from British horseracing. We recommend that gross profit in the case of betting exchanges should be defined as the revenue derived from their gross commission on horserace betting business deducted from the amounts paid out to bettors and bet-takers. (iv) Betting Exchange Customers. We recommend that all betting exchange customers who wish to lay bets through the facilities of a betting exchange or bet-broker should be charged levy at a flat rate of 10% on any gross profits derived from laying bets on British horseracing. In effect, this recommendation means that the charge is 10% of all layers’ profits assessed on an annual basis, which equates to the extraction of all “lays” relating to British horseracing on individual accounts and assessing the profit made on those “lays” during the year; ie, there is no aggregation between individual layers. “Backs” are not taken into account and there is no provision for offsetting successful “lays” against losing “backs”
“For the first time, the Committee will be making specific recommendations in respect of spread betting companies and betting exchanges/bet-brokers. We recognise that, under the 41st Scheme, the bet-brokers are currently required to pay levy at a rate 10% of the gross profits which they derive from the commission charged to their customers on horseracing business. However, we consider that individuals using the facilities of a betting exchange to lay bets also have an individual liability to pay levy on any gross profits they may make from horseracing and we will make recommendations to this effect; this reflects the BHB’s commercial policy.”
“At a later meeting of the HBLB on23 October 2002 , Mr Tristram Ricketts, Secretary General of the BHB, said that although a licence agreement had been signed by Betfair and returned to the BHB, the BHB had not co-signed the agreement because Betfair had not provided certain requested information. Mr Ricketts also said that “it appeared unlikely that any licence agreement with the betting exchanges would be concluded and in place before 31 October” (“RLB2” page 167).”
“50. Press reports following the joint press release on17 April 2002 made reference to the idea of future levy schemes mirroring the commercial arrangements between bookmakers and the BHB (see e.g. Racing Post,18 April 2002 , fourth paragraph from the end, at “RLB2” page 69). The idea that the terms of the 42nd levy scheme would mirror the terms of the data licence agreements entered into between the BHB and certain off-course bookmaking companies was well known in the industry at the time. 51. Although the anticipation of the major bookmakers had been publicly stated, this aim was not conclusive as to what terms would be adopted by the Bookmakers’ Committee for recommendation to the HBLB or what would be approved by the HBLB. I refer for example to an observation made by the Chairman of the HBLB during a meeting of the HBLB on23 October 2002 . The minutes record that he: “acknowledged the Committee’s desire to reflect the BHB’s current commercial policy, but said that it did not have any statutory force and, therefore, the HBLB must consider the issues from the point of view of the statutory levy process” (first paragraph on page 3 of the minutes for that meeting at “RLB2” page 166). I would respectfully invite the Court to conclude that there is no evidence that any of the board members failed to take into account their statutory and other obligations to the board when taking decisions as board members, nor put themselves (or indeed were put) in a position which could fairly be perceived as having compromised their role as board members.”
“Applying the recommendations described above, the Committee estimates the projected yield from the 42nd Scheme to be in the order of£94.31 million , to which may be added an allowance of up to£3.5 million for receipts from racecourse bookmakers betting exchanges and their customers, and the minimum guarantee, giving a total estimated yield of£97.81 million . However, as notified to the Board under separate cover, the Committee is aware that the effect of the betting exchanges has been to reduce the margins of bookmakers; if this trend were to continue, then it is most improbable that there will be significant growth in gross profits on horseracing next year. In that event, we would estimate the levy yield to be in the region of£93M -£94M .”
“2.2 These figures need to be treated with some caution since little hard information is available on the fast changing betting market this year. For example, the Committee includes in its forecast, a contribution from the Betting Exchanges of£1.3m . This implies a total Betting Exchange turnover of around£6.2m per week (a 10% levy charge on a 4% gross profit margin). Recent Press reports indicate that turnover is currently running closer to around£20m per week”
“Comment 6. It is understood that commercial deals between the BHB and the on-course bookmakers and the Betting exchanges have not yet been concluded. Discussions are continuing and it is likely, therefore, that the Committee will wish to change its recommendation in respect of one or both of these activities before31st October 2002 . 6.1 … 6.2 It is unknown whether the Betting Exchanges will be able to comply with the proposed charge on layers. At the least, it will require them to change their computer and accounting systems, with a degree of complexity and attendant cost. It is suggested that this issue should be explored with the leading Betting Exchanges before the Board takes a final view.”
“Referring to comments made earlier to members by the Minister, Mr Bartlett said that it was incumbent upon all parties to reach an agreement on the 42nd Levy Scheme, thus avoiding a referral to [the Secretary of State]. ”
“noted that whilst the proposals for Betting Exchanges were controversial, they resulted from due process for levy purposes. …”
“Whilst noting THE CHAIRMAN’s views, MR JONES said that he was concerned that the minority parties, within the bookmaking industry, i.e. spread betting bookmakers and Betting Exchanges, were not sufficiently represented on the Bookmakers’ Committee which, in his view, was not fair. He did not think it was right that the majority views of the Committee should be imposed on those two sections of the industry to reach an agreement. The proposals were, therefore, invalid. …”
“Comments then followed between THE CHAIRMAN, MR RICKETTS, MR BARTLETT AND SIR ERIC on the interpretation of, and validity of Betting Exchanges and the impact of their operation on the betting market. MR ROSS [an observer] said that the recommendations put forward by the Bookmakers’ Committee were intended to be a mirror of the BHB commercial policy. He said that the legality of the activities of Betting Exchanges was a separate issue to determining the Scheme. He referred to the Minister’s earlier comments that the activities of Betting Exchanges was [sic] “potentially illegal”
“Following the meeting Mr Hughes wrote to Mr Bartlett on23 September 2002 (“RLB2” pages 127 and 128). Amongst the points which Mr Hughes made in that letter, he noted that the Bookmakers’ Committee’s comments in respect of enforcement of certain National Pitch Rules had been passed to the NJPC (3rd paragraph at “RLB2” page 127). He also requested the supporting statistical analysis regarding the fall in the proportion of horseracing’s share of total gross profits from betting (5th paragraph at “RLB2” page 127). Mr Hughes also discussed the absence of any commercial arrangements between the BHB and three types of bookmakers; on-course bookmakers, spread betting bookmakers and betting exchanges (6th paragraph “RLB2” page 127). He also acknowledged the issue, which had been mentioned in the HBLB meeting of18 September 2002 (see above at paragraph 69), as to whether agreement needed to be reached between the Bookmakers’ Committee and spread betting bookmakers and betting exchanges (which he identified as a legal point.)”
“The justification given by the Bookmakers’ Committee in the BC Submission appears to be that because the Bookmakers’ Committee believes that betting exchanges may be squeezing the profit margins of conventional bookmakers and that betting exchanges generate less levy per pound of betting turnover, the basis on which betting exchanges are assessed must be extended. We explain: (1) why the Bookmakers’ Committee’s statistics and conclusions are insufficiently substantiated to be taken into account by the HBLB; (2) more importantly, why even if these statistics and conclusions were true, the conclusions are merely the effect of legitimate competition and, as such, constitute an improper justification for extending the basis of the charge; and (3) that the HBLB does not have the statutory authority to impose levy on anyone other than bookmakers and therefore the recommendation that “all betting exchange customers who wish to lay bets through … a betting exchange…should be charged a levy at a flat rate of 10% on any gross profits derived from laying bets on British horseracing” cannot be adopted. We oppose any decision by the HBLB to adopt a dual basis of assessment, given the questionable impartiality of the Bookmakers’ Committee and the BHB, whose appointees represent about half of the HBLB, and the limited justifications put forward for the dual basis and the procedure employed in reaching this decision. We then set out the alternatives which we would submit are fair and therefore open to the HBLB. We conclude by recommending that the HBLB adopt a 42nd Levy Scheme in which betting exchanges continue to be charged, as is currently the case for the 41st Levy Scheme, on a commission basis. We indicate however that as a fair alternative, betting exchanges might be required to account for levy on the basis of their profitable layers’ profits basis but that, if so, caps on liability should be imposed to protect against volatility.”
“(1) The Bookmakers’ Committee believes that the 41st Levy Scheme will generate£6m less levy than the Bookmakers’ Committee initially predicted; (2) the Bookmakers’ Committee believes that this shortfall is due (i) to profit margins of the conventional bookmakers being squeezed by “artificial” inflation of SP; and (ii) to the assumption that betting turnover channelled through betting exchanges generates less levy; (3) therefore a new basis of levy should be imposed on betting exchanges.”
“Any decision to increase the charge paid by lower margin competitors is intrinsically anti-competitive, pandering to conventional bookmakers and encouraging them to sustain their oligopolistic overrounds and profit margins.”
“Notwithstanding the statutory limitations, we believe that the logic of treating all layers equally regardless of whether or not they are registered bookmakers is completely flawed. Fundamentally the distinction between backing and laying on an exchange is arbitrary: if a punter offers odds on Man Utd not to win the Premiership, has he layed that outcome or backed the outcome Man Utd to win it? … Betting exchange users are generally ordinary punters who are prepared to enter a bet with other punters that an outcome will or will not occur. Unless a user is a registered bookmaker with all of the rights and obligations that entails (authority to advertise and solicit bets directly from the public, handle their stakes, pay out their winnings etc), there is no justification for treating him differently merely because he choose to bet that an event will not occur (i.e. ‘laying’) instead of choosing to bet that an event will occur ( ie. ‘back’).”
“Betfair has calculated that if the dual basis of assessment proposed by the Bookmakers’ Committee had been applied during the period April – September 2002, this would have generated liability to levy equal to approximately 19% of Betfair’s commission over the same period. The new element in the BC Submission (i.e. 10% of all profitable layers’ profits) would however generate an extremely volatile liability which would be impossible to predict. In many circumstances, levy liability will greatly exceed commission revenue generated by the betting exchange; indeed in any races where an odds on favourite loses, the levy liability generated will be many times greater than the commission revenue generated. This solution is also open to sabotage: Two people A and B could act in concert. Person A lays a horse to Person B for£10,000 at Evens and Person B lays that same horse to Person A, also for£10,000 at Evens. Regardless of the outcome, both Person A and Person B come out flat and thus pay no commission. However, if the horse fails to win then both Person A and Person B will have won on the “lay” part of their bets and will, together, generate£2,000 (£10,000 x 10% x 2) of levy liability for the exchange. Clearly, this is a grossly simplified example but it serves to illustrate how such a solution is very open to sabotage. The Bookmakers’ Committee and the BHB may argue that it is up to the betting exchange whether it seeks to recover the cost from the layers themselves. It is quite clear however that that would not be a commercially viable option for the exchanges. There may be accounts which quite legitimately end up in the situation described above, where each is flat from a net winnings perspective but which would give rise to a large levy liability. Passing this cost on to layers would completely distort trading activity on betting exchanges. The exchanges would therefore have to choose between undermining the business model or paying the increased liability themselves. They would no doubt opt for the latter. In short, if the Bookmakers’ Committee proposal is accepted, the liability of betting exchanges would probably be doubled and would be exposed to extraordinary volatility and sabotage. In such an oppressive environment, it is likely that some if not all betting exchanges will choose to relocate off-shore.”
“The aggregated layers’ profits basis has proved extremely volatile but appears to work reasonably well for short accounting periods, such as one month. However for longer accounting periods such as the one year period used for levy schemes, the aggregated layers’ profits basis is unlikely to work well because over such extended periods the aggregated position of layers will tend to zero.”
“Also, as discussed above, this solution is flawed in practice in that it exposes the betting exchange operator to enormous volatility because the liability to levy is dependent not on the gross profits of its own operation but on those of its layers, which are not within its control. The aggregated profitable layers’ profits basis would indeed be significantly more volatile than the aggregated layers’ profits basis. It would also be open to sabotage. Despite these flaws, we believe it would be possible to accept the aggregated profitable layers’ profits basis as fair as long as (i) it is the exclusive basis for assessing betting exchanges to levy; and (ii) sensible caps are placed on potential liability to ensure that it does not become unreasonably large and to manage the inherent volatility and potential for sabotage.”
“We believe that this is best achieved by betting exchanges continuing to account for levy on a commission only basis. However if the HBLB prefers to adopt a profitable layers basis, we believe that this could be made fair if reasonable caps were imposed on liability to protect against volatility and sabotage.”
“… the Committee is now seeking legal advice in respect of its statutory remit in making recommendations which impact upon all bookmakers and bet-brokers; and also in respect of due process in discharging that remit.”
“33. In and around20 October 2002 , I read an article in the Racing Post newspaper which stated that the Bookmakers' Committee had proposed that for the 42nd Levy Scheme, the levy imposed upon betting exchanges would be: (a) 10% of the commission received from bets on British horse racing; plus (b) 10% of the aggregate profitable layers' winnings bets on British horse racing (that is the total of only those betters who had placed bets in the period as layers and who, over the period, had made a profit from the bets they had laid – those who had made a loss would be excluded from the calculation). 34. Sporting Options never received any direct communication from the Levy Board or the Bookmakers' Committee regarding the proposals despite the facts that we were registered with the Levy Board, paid a Levy each month to the Levy Board and we were a betting exchange which, as the Levy Board and the Bookmakers' Committee must have known, had a real and immediate interest in any changes to the Levy Scheme as it applied to betting exchanges. 35. I was appalled that the Levy for betting exchanges could be set by reference to aggregate profitable layers' winnings. I was concerned that the proposal would have a very considerable harmful economic impact on our business in that we would have to pay a greatly increased amount in the Levy irrespective of the amount of income received. 36. I immediately telephoned Mr Rodney Brack, the Chief Executive of the Levy Board. He confirmed that the article in the Racing Post was correct. He expressed some sympathy with the position of Sporting Options. We arranged to meet a week later on28 October 2002 to discuss the question of the levy proposed as it applied to us. 37. I also telephoned Mr Edward Wray, the Managing Director of Betfair. Mr Wray told me that he had received a letter early in October from the Levy Board setting out the proposals. I told him that I had received no such letter. He said that he had prepared a paper setting out Betfair's response to the proposals which he had submitted to the Bookmakers' Committee. He also told me that there was a meeting of the Bookmakers' Committee taking place the following Friday,25 October 2002 . I arranged with Mr Wray to attend that meeting with him. 38. I was very busy running Sporting Options at this time. In the short time available, I did not have the opportunity to prepare our case against the proposed Levy Scheme as thoroughly as I would have liked. It seemed to me the unfairness of the proposal was obvious and I proposed to put this to the Bookmakers' Committee on 25 October. 39. On25 October 2002 , I met with Mr Wray in a hotel some half an hour before the meeting with the Bookmakers' Committee was due to take place. He showed me a paper which Betfair had submitted to the Bookmakers' Committee. I reviewed this document quickly. I noted that it stated that Betfair preferred that the Levy for betting exchanges should continue to be assessed on the basis of gross commission but stated that it could accept that this Levy be assessed on the basis of aggregate profitable layers, provided there was a cap which meant that the amount payable did not exceed a percentage of gross commission. This did not seem sensible to me. Although such a cap would provide a degree of protection for betting exchanges, I considered that the only proper basis for assessing the Levy for betting exchanges was gross commission because it was imperative that the Levy was assessed proportionately to our gross profits (that is our commission) as it is for traditional bookmakers. 40. At the meeting, I made a number of points to the Committee. A copy of the minutes of the meeting was later provided to me... . During the meeting I made it clear that my view was that the only fair basis to assess the Levy on betting exchanges was (as with the 41st Levy Scheme) on gross commission received. 41. On the following Monday,28 October 2002 , I met with Mr Brack. He was extremely sympathetic to the position of Sporting Options and of betting exchanges generally. He agreed with all my points and he indicated that he thought that the only fair basis to assess the Levy for betting exchanges was on gross commission. After that meeting, I prepared a short note for submission to the Levy Board. I attach a copy at KRPG4 [3/204].”
“What happened next was that I met with Mr Griffiths of Sporting Options on 28 October. Mr Griffiths had telephoned me (possibly on 20 October, although I am not sure) to express his concerns over the proposed 42nd levy scheme. Noting these, I had suggested that we meet. During this meeting, Mr Griffiths had explained why he was opposed to the Bookmakers’ Committee’s recommendations. He also set out why he disagreed with Betfair’s attitude to these recommendations set out in Mr Wray’s letter of15 October 2002 (i.e. Mr Griffiths was only willing to accept the commission basis and was not prepared to accept the individual layers’ basis, even with a cap). Contrary to what Mr Griffiths says at paragraph 41 of his witness statement, I did not express sympathy for the position of Sporting Options and the betting exchanges generally. Nor did I agree with the points he was making and indicate that the only fair basis to assess the levy for betting exchanges was on a gross commission basis.”
“On-course Bookmakers 6. Following members’ comments at its September meeting, the Bookmakers’ Committee has held further consultations with its members who represent the on-course bookmakers. This provided them with an opportunity to explain their objections to the Committee’s recommendations in respect of on-course bookmakers. It is understood that, as a result of those consultations, amendments will be made to the Committee’s recommendations, but this will not be in time for their consideration at the 23rd October meeting. Legal Advice 7. In view of the comments expressed at the last meeting by the Chairman of the Tote with regard to the Committee’s recommendations in respect of betting exchanges and spread betting companies, legal advice was sought from the Board’s solicitors, Herbert Smith, on the process which the Committees had followed. A copy of Herbert Smith’s advice is attached as Appendix ‘B’. Submission from Betting Exchanges and Spread Betting Companies 8. In the light of Herbert Smith’s advice, the Chief Executive held meetings with representatives of Betfair, the largest betting exchange company, and the Spread Betting Association. Both groups, at their respective meetings, made it clear that; (a) they were not represented on the Bookmakers’ Committee; (b) they had not been properly consulted, in their view, by the Bookmakers’ Committee in the preparation of it s recommendations; and (c) they objected strongly to the recommendations on the grounds of quantum. 9. As a result, they were invited to make written submissions to the Board setting out their views. …”
“that, in his view, there was a changing betting marketplace, and a lack of a clear understanding of what the betting exchange business entailed prevented the establishment of a fair and level playing field for all interested parties.”
“MR JONES suggested that in the event there was no agreement reached with the betting exchanges and spread betting companies, there should be acceptance of no change to the levy rates by the Committee. He proposed that this would provide time while the BHB pursued its commercial agreement. He felt that if higher rates were forced through they would attract a legal challenge. This could lead to unpleasant public allegations of collusion between the BHB and the bookmakers for anti-competitive purposes. Taking members’ views into account, and his understanding of the situation, Mr K BROWN said that if it was being suggested that there was a difference between the two sides of perhaps an additional£3m , this amount was not so significant to pursue that it should result in a referral to the Secretary of State, who had already made it clear that she would not wish to entertain another levy scheme determination. He also said that, if there was a referral, it was highly likely that the Secretary of State would merely repeat her determination of the relevant terms of the Forty-First Levy Scheme. He said that in risk: reward terms, in his view, to risk the whole levy against an extra£2m -3m was unjustified. Also, the fall out from any referral would be high and the reward very little; it must be avoided at all costs. A compromise was necessary and it should be agreed next week. THE CHAIRMAN AGREED. MR BARTLETT said that he supported MR K BROWN’S views regarding the fallout of any referral, and his Committee were working hard to avoid this. However, in terms of the amount of money that the betting exchanges should pay, he pointed out that they earned 90% of their business from British horseracing using the BHB’s racing data. Whilst the exchanges had offered to pay levy, it should be acknowledged that their businesses were successfully operating as a result of a tax concession but once this was removed their businesses would founder. MR BARTLETT said the betting exchanges should pay the same as other bookmaking businesses. MR RICKETTS commented that the BHB was not holding the Committee to its commercial intentions.”
“I believe that all board members were already aware by 25 October of the difference between what Mr Davies describes as the ‘layers’ aggregated profits basis’ and what he describes as the ‘layers’ profits mechanism’ apparently adopted by the BHB.” “I would be very surprised” if they did not read the Racing Post that day including this letter” (ibid.). The email was not forwarded to the Board members although Mr Brack believes that he would have discussed it with the Chairman. The email reads: “Richard Wright’s article (Racing Post25/12/2002 ) illustrates the twin folly of Betfair’s claims it is not a bookmaker and Betfair’s dubious deal to pay Gross Profits Tax on exchange ‘layers aggregated profits’ which, as I predicted in a letter published here earlier this year, is now beginning to backfire on them, leaving their users and other exchanges caught in the crossfire. Betfair and Flutter (now part of Betfair) negotiated this deal with the government, fully aware the low over-round books and professional backers in operation on their exchanges were ensuring the layers collectively lost and there would be little GPT for Betfair and Flutter to pay [see further Betfair submissions, paragraph 70 above]. But GPT for betting exchanges is under review now and, more immediately, the BHB has adopted the ‘layers’ profits’ mechanism as the basis for paying for the Data Rights Licence, but has cunningly amended it so one layers’ losses cannot be offset against another. Moreover now, capitalising on Betfair’s dogmatic insistence it is not a bookmaker, the BHB is set to impose a second licence, levying 10% of the exchange’s gross commissions on UK horseracing, in addition to 10% of layers’ profits on UK horseracing. The 10% levy of all commissions on UK horseracing is reasonable, but an additional 10% of all layers’ profits could leave exchanges with the twin consistently exceeding revenues, raising the spectre of the exchange having to pass the Levy onto its users in the form of higher commission rates. The saddest aspect of this shambolic performance by Betfair – which leaves themselves, other exchanges and all exchange users in a parlous state – is that it could so easily have been avoided. Exchanges are bookmakers. Bookmaking is about laying bets to lock in a profit on any given event so that, ultimately, the bookmaker has no interest in the outcome of the event. By locking in a profit on every matched bet (via the commission) exchanges demonstrate that “bet brokering” is actually bookmaking in its purest form. ‘Layers’ on exchanges are NOT bookmakers. They are punters, betting on thing not happening, the same as people who sell performances with spread firms are punters. Bookmakers want a level playing field – fair enough. But these new proposals are not equitable. Bookmakers make their Gross Profits via their over-rounds, exchanges make their Gross Profits via gross commission. The fact exchanges garner less in commission on turnover than bookmakers do via the over-round is a key reason why exchange betting is a superior product for “win only” and “place only” betting to betting with a bookie in the modern era. It’s not creating a level playing field to penalise an exchange because it offers better value for a punter’s betting pound than a bookmaker. That would be like Harrods saying Asda should pay more higher rates of tax because Asda charge their customers lower prices and are nicking Harrods’ customers. Exchanges should pay 15% GPT on all its commissions to the Treasury and an additional 10% of its UK horseracing revenues to the BHB in Levy.”
“However, I would like to reiterate my position elucidated at the last meeting. It would be disastrous for Levy and racing for this to be referred to the DCMS. It sends out totally the wrong message that we cannot manage our own affairs and should have sorted out the commercial arrangements months ago. There must, therefore, be a strong possibility that the DCMS would first roll over the 2002/3 settlement if they received a referral. However, a Chancellor anxious for revenue would see a rise in the GPT rate fair game and even a punishment to the bookmakers. Therefore a referral can only be to everybody’s disadvantage. We cannot run the risk of legal action from the bet-exchanges for potentially another£2m of income and risk£85 -90m from the Levy. I fully understand that the bookmakers see bet-exchange operations in an uneven playing field, but it may not be as uneven as they make it out to be. The Levy is not there for commercial advantage. Furthermore it is clear that current legislation was framed at a time when this type of technological innovation could never have been envisaged. The Minister seemed clear that he wished to avoid a conflict today but would legislate tomorrow. The Bookmaker Committee and the Levy Board must be careful not to pre-empt legislation. The DCMS made its views known on the Levy to be paid by bet-exchanges and spread betting companies at the last settlement and the lowest risk strategy is to continue with the existing rates until a firm commercial agreement is put in place. I hope you will be able to persuade the Bookmaker Committee that a referral is in the interests of neither the bookmakers nor the HBLB.”
“As a matter of longstanding practice, a committee agrees its final recommendations at the end of the day on 30 October, leaving me, as Secretary, little if any time to turn around the necessary documents and forward them to the Levy Board in time for their meeting on 31 October.”
“On reflection, we believe this basis [the 41st Scheme basis] to be inappropriate because the exchanges themselves do not bet on race outcomes, whereas, like bookmakers, those who offer to lay horses through the medium of the exchanges do. We therefore consider that a more suitable mechanism would be for the exchanges, as the sole facilitators of such betting, to be accountable for a levy assessed on the gross profits of their successful layers; and we will make recommendations to this effect.” (Emphasis added)
“We recommend that betting exchanges should be assessed for levy on the basis of the gross profits earned by those of their customers who successfully lay bets on British horseracing through the medium of a betting exchange.”
“Furthermore, we recognise that, under the provisions of the 41st Scheme, permit holding bookmakers are required for levy purposes to declare any gross profits accrued as a result of conducting business through the exchanges. We therefore recommend that, if the exchanges are responsible for making the appropriate levy payments, irrespective of whether or not they choose to charge this cost to their customers, the liability should be disregarded as discharged in full and that the requirement for permit holders to make separate declarations in respect of levy should be discontinued.” (Emphasis added)
“I therefore gave an oral report of the meeting to the Chairman and the independent members of the HBLB, shortly after the meeting (and certainly before the next board meeting on31 October 2002 ).”
“Sporting Options’ insistence on a commission-based levy had been communicated to me and to the two independent members at a briefing with Mr Brack who had met with a representative of Sporting Options.”
“Noting the tabled proposals, as amended, from the Chairman of the Bookmakers’ Committee set out in a letter dated30th October 2002 , THE CHAIRMAN asked if copies had been sent to the betting exchanges and spread betting companies; he was of the view that this should occur. MR BARTLETT said that this had not occurred and that he wished to reflect on the request. MR JONES agreed that sending the amended proposals to the affected parties, as soon as possible, would be appropriate.”
“He suggested, however, that the Board members could decide if they wished to distribute the information to the two parties.”
“Comments then ensued between MR JONES, MR BARTLETT, THE CHAIRMAN and MR ELLIOT on the effect of not circulating the proposals in the event that the two parties chose to seek a Judicial Review. It was confirmed that the exchanges and spread betting companies were not aware of the detail of the Committee’s amended proposals. MR ROSS [the observer] said that the Committee had carried out its statutory responsibilities by circulating its final, amended proposals to the Levy Board. It was his view, therefore, that it was not necessary for the exchanges and spread betting companies to be accorded the right to view and comment on the amended proposals. THE CHAIRMAN reiterated his view, and agreed with MR JONES and MR ELLIOT that the proposals should be circulated by the Committee to the two parties as a matter of courtesy. SIR ERIC agreed that if the proposals were to be circulated, it was for the Committee and not the Board to do this. In response to MR BRACK, MR BARTLETT said that the Committee’s secretary had visited and consulted with the two parties in July [apparently Betfair, but see paragraph 58 above, and the Spread Betting Association] before the initial recommendations were prepared. He confirmed that the Committee had taken legal advice to the effect that the Committee should consult further on the recommendations with the exchanges and spread betting companies; this had been done and, as a result, the proposals had been amended. Following further comments from THE CHAIRMAN and MR BARTLETT, MR JONES proposed that, in the absence of the Bookmakers’ Committee being prepared to send their proposals to those parties materially affected by the proposals, the Board should do so. SIR ERIC proposed, in amendment, that the Board should request the Committee to send them to the two parties not represented on the Committee. The Board then voted on the amendment and it was carried. Upon being put as the substantive motion, THE BOARD RESOLVED: That the Board should request the Committee to send its amended proposals to the two parties not represented on the Committee.”
“THE CHAIRMAN then thanked the Committee for its amended proposals, but expressed concern regarding the lack of change in the proposals affecting the spread betting companies. He said that the proposed levy rate of 10% represented a 400% increase over the Secretary of State’s determination in March of 2%. He understood the Committee’s desire to set a level playing field between competing bookmakers and that it was consistent with the other proposals. However, it could make the Board vulnerable, if it was accepted on the proposed basis.”
“Both MR JONES and MR ELLIOT requested clarification on what the amended proposal relating to the payment by betting exchanges would yield compared to the initial proposal. MR BARTLETT and MR SMITH confirmed that this was a difficult calculation and not easy to estimate because of the fast changing nature of the betting exchanges’ business. SIR JOHN also expressed surprise that this was not available, and added that even an educated guess would be helpful. MR ELLIOT accepted that the proposal would increase Levy Board income.”
“Commenting on the levy, its statutory process, and having regard to the fair treatment of all parties to the agreement, MR SMITH asked if yield was more important than equity.”
“MR BARTLETT confirmed that the betting exchanges were willing to pay either on an assessment of the profits of their successful layers, or on their gross commissions, but not on both.”
“He [Mr Bartlett] also explained the Secretary of State, when determining the Forty-First Levy Scheme, had had available to her a Nottingham Trent University Report commissioned by the Spread Betting Companies themselves. MR BARTLETT said that at that time the Report was not passed to the Committee, so the Committee was unable to express a view on whether what was proposed [by the Secretary of State] was fair or equitable. In fact, a request for the same Report the previous day had been refused. This had not been helpful to the current process.” 117. Mr Jones said that he believed that the Committee was attempting to align the payment by betting exchanges with the payment by bookmakers. The Chairman said: “that it was important not to double guess the Committee’s motivation”
“with no representation on the Bookmakers’ Committee that was why it was important to circulate the Committee’s proposals to the involved parties.”
“Both MR JONES and THE CHAIRMAN agreed that betting exchanges were a new and largely ‘unknown’ element to the betting industry and, therefore, it was necessary to receive a robust proposal from the Committee.”
“In response to SIR ERIC, MR BARTLETT confirmed that the Committee’s proposal relative to the betting exchanges was different only in detail to the arrangements with Customs & Excise, however, this was currently under review.” (Emphasis added)
“THE CHAIRMAN then summarised the discussions: It was clear that members still had concerns on several aspects of the amended proposals and they could not be agreed as they stood; Regarding spread betting companies, the consensus was that there appeared to be concern about the sensitivity of increasing their payment level to the proposed proportion; It was acknowledged that the Committee had gone through the proper consultation process in finalising the proposal relative to betting exchanges, which was deemed fair and in line with the needs of racing; however, noting earlier comments, he urged the Committee to consider circulating the proposal to the betting exchanges”
“The Board felt that the bookmakers should simply declare their gross profits on British horseracing, and there should not be a zero rated category based on foreign horseracing; There was discontent regarding the 54% default level set for British horseracing’s share of total gross profits. In requesting the Committee’s members to reflect on the comments that had been made, THE CHAIRMAN proposed that the meeting be adjourned until 2:00 pm so that amendments to the recommendations could be made; he proposed that a Vote on the Committee’s then proposals should take place at that time. The meeting adjourned at 12.20 pm and reconvened at 2.00pm.”
“THE CHAIRMAN said that the independent members retained concerns about the proposals in so far as they related to the spread betting companies. He wished to invite the Committee to consider rolling forward the terms of the Forty-First Levy Scheme. This would provide time for the Committee to study the position of the spread betting companies before making proposals for the Forty–Third-Levy Scheme. He said that this was not intended as a criticism. In response to MR BARLETT as to why the on-course bookmakers were not included in this request, THE CHAIRMAN said that they were represented on the Committee and had demonstrated their collective responsibility in endorsing the majority view of the Committee. It was felt that the possibility of a legal challenge from the on-course bookmakers was minimal. MR BARTLETT did not agree with that view. MR ELLIOTT said that the NAB (on-course bookmakers) had been make privy to the Committee’s proposals, whereas the betting exchanges and spread betting companies had not; this was the key point of difference. MR BARTLETT explained that the two parties had in fact received the first set of proposals presented in September.”
“On behalf of the independent members, THE CHAIRMAN urged the Committee again to consider rolling forward the relevant terms of the Forty-First Levy Scheme arrangements. He added that, if there was a referral to DCMS, it was likely that this would be the basis of the Secretary of State’s determination.”
“The consensus was that the Committee had prepared a fair submission for the Board’s consideration; this was based on the premise that there was no discrimination, and all the betting media were treated equally.”
“However, we accept that more research may be required in pursuit of this objective and are therefore prepared to recommend that, for the period of the 42nd Levy only, the rate of 2 per cent gross profit determined by the Secretary of State for the 41st Scheme should remain in place. … [W]e do not accept that 2% is a fair rate when compared to other bookmakers.”
“The Committee had taken note of members’ comments, and the BHB’s in particular, and were prepared to recommend a British horseracing default figure, increased to 57%, from 55%, for the Forty-Second Levy Scheme.”
“THE CHAIRMAN expressed the Board’s appreciation to MR BARTLETT and MR ROSS for the efforts that they and their Committee colleagues had made in proposing acceptable terms. MR RICKETTS, on behalf of the BHB representatives, endorsed the CHAIRMAN’S comments. He noted that there were likely to be a number of variations between the levy agreement and the commercial deal that would ultimately be concluded. He expressed the hope that the BHB’s support today would not prejudice any future talks to come.”
“In the present context, Parliament has provided for a mechanism by which the views and interests of affected persons can be taken into account through the BC”
“To be proper, consultation must be undertaken at a time when proposals are still at a formative stage; it must include sufficient reasons for particular proposals to allow those consulted to give intelligent consideration and an intelligent response; adequate time must be given for this purpose; and the product of consultation must be conscientiously taken into account when the ultimate decision is taken…”
“I was very busy running Sporting Options at this time. In the short time available, I did not have the opportunity to prepare our case against the proposed Levy Scheme as thoroughly as I would have liked.”
“42. Reviewing the comments I made at the meeting of the Bookmakers' Committee and a paper I asked to be read by the Levy Board, I considered that I did my best at short notice (I had just three full days before the meeting of the Bookmakers' Committee) on a complicated area to make the position of Sporting Options known. However, I consider that if I had been consulted properly on the proposals and if I had had more time to prepare I believe that I could have made the points I did make more forcefully and further points as follows: I would have been able to calculate the economic impact these proposals would have on the business of Sporting Options by reference to our past performance. If I had been provided with the reasons for the proposed change in the Levy, I would have been able to consider and address them and suggest alternative options which may have achieved the same ends without causing such harm to the business of Sporting Options. I would have pointed out that the Levy Scheme proposed discriminated against betting exchanges compared to traditional bookmakers. I would have pointed to the particularly severe impact of the proposed Levy Scheme on new entrants in the market. 43. Moreover, I do not consider that the approach made to and consultation afforded to Betfair by the Levy Board was in any way an adequate substitution for consultation with Sporting Options. Betfair is a different company and while we are both betting exchanges, it is in a radically different position in the market and the impact of the proposed changes on its business and on our own is very different. Indeed, I believe that the fact that Betfair was given a much better opportunity to put its views forward to the Bookmakers' Committee and the Levy Board than we were skewed the consultation against us. For example, the Bookmakers' Committee and the Levy Board may have given considerable weight to Betfair's preparedness to accept in principle a Levy assessed on aggregated profitable layers (but subject to a cap) although we strongly opposed this. I can see no justifiable reason why we were not consulted on the proposals equally with Betfair.”
“In the event (as occurred last year) that the new scheme has to be referred to the Secretary of State for determination, the following steps take place, before the administrative steps for implementing the new scheme can occur (under a compressed time-frame to meet the 1 April start-date). Again, this is well-known within the industry. 1) The Secretary of State writes to all interested parties, such as the BHB and the Committee, inviting them to make representation on the terms of the new scheme. Representations are generally made in writing, although if expressly requested, and the Secretary of State deems this to be appropriate, oral representations may be made in addition to or instead of written representations. The process of requesting and receiving representations generally takes three to four weeks. 2) The Secretary of State may then appoint external economic consultants or chartered accountants in order to assess various aspects of the submissions received from interested parties, and/or related issues, and advise. 3) The Secretary of State’s officials at the Department of Culture, Media and Sport will then consider the representations and any expert reports before putting recommendations before her for the determination of the new scheme. Altogether, this process can take several months.”
“[The claimant] submits that … the decision of the Board on31 October 2002 to adopt the scheme was irrational, since it was taken by the board without the benefit of essential information, or a proper understanding of centrally relevant matters, and without any consideration of the issues that arose, or any conclusions being reached in relation to them. The Board failed to ask itself the right question, or to take reasonable steps to obtain the information necessary to answer that question.”
“3.10 In proposing alternative GPT arrangements for exchanges many respondents (primarily representing traditional bookmakers) argued that the principle of treating all exchange layers as bookmakers for duty purposes should continue. The one change they advocated was to move away from the process of aggregating the position of all layers over the month, to taxing the profits of just winning layers. 3.11 The Government has decided not to adopt this approach. This is because it would fail to address the fundamental flaws with current arrangements, for example the lack of any direct link to an exchange’s revenue and the volatility of duty liability, indeed these problems would be exacerbated. Had duty been based on the aggregated profits of winning layers the effective rate of tax [15% of the profits of winning layers] for exchanges during 2001-02 would have exceeded 30% [of the commission], threatening the business model. 3.12 The main alternative is to levy duty on an exchange’s commission – effectively the real gross profit for operators. This would relate tax to ability to pay; it would address concerns about the volatility of duty payments under the current system; and liabilities could not exceed commission. 3.13 The Nottingham Universities conclude that such an approach would be fairer and more efficient than the current system. All betting exchanges that responded to the evaluation believe this approach would be appropriate.”
“Further, the Decision discriminates without justification against betting exchanges. Betting exchanges are being less favourably treated than traditional bookmakers, who are to be charged the Levy on the basis of 10% of their own gross profits. Traditional bookmakers [unlike the exchanges] are thus to be taxed on a basis that is by definition proportionate to their profits, at a reasonable level, predictable, and not vulnerable to abuse. (Paragraph 80 of claimant’s skeleton argument)”
“The impact on any new business, competing with a very well established rival (Betfair) of being forced to raise its prices by one third is self-evident. If the Claimant could compete with prices one third higher than they are currently set, it would already be doing so. The difficulties are particularly great in this market, since an exchange cannot operate without a large enough pool of customers to generate a market. The business is extremely price sensitive, particularly for new, smaller exchanges, yet the 42nd scheme has the greatest impact upon them (see Griffiths at 1/81, paragraph 52(b)). In short, the increase in commission is very significant, and is likely to hit disproportionately at new entrants. The 42nd scheme is a very significant barrier to entry.”
“The members did not even have the benefit of an “educated guess”, as to the amount that would be raised, as was acknowledged on31 October 2002 [paragraph 109 above]. This is in contrast to the efforts made by the Defendant to verify the BC’s estimates of the share of horserace gross profits in total betting gross profits, which were subjected to independent analysis … . It also contrasts with the treatment of Spread Betting Companies. The Defendant decided to leave the basis for the assessment of the Levy on Spread Betting Companies unchanged, on the ground that more research was required into their operation: [see October 31 letter from Committee, paragraph 136 above].”
“[The Chairman] said that the proposed levy rate of 10% represented a 400% increase over the Secretary of State’s determination in March of 2%.”
“The new element in the BC Submission (i.e. 10% of all profitable layers’ profits) would however generate an extremely volatile liability which would be impossible to predict. In many circumstances, levy liability will greatly exceed commission revenue generated by the betting exchange; indeed in any races where an odds on favourite loses, the levy liability generated will be many times greater than the commission revenue generated.”
“Just because betting exchanges tend to make smaller margins by charging ‘minimal commission’ does not mean that it is fair to impose a different basis of tax just as it would not be fair to impose on Ryanair a different basis of corporation tax than British Airways.”
“… under the 42nd scheme, licensed bookmakers are not liable to be assessed for the levy on any profits they make through laying bets on betting exchanges. Instead, the exchange (which may have earned no commission from their bets) is liable to pay the levy on the bets laid by the profitable licensed bookmaker. The amount of the levy due is assessed purely on the basis of the bookmaker's performance on the exchange. The result is that if a bookmaker has made a loss laying bets through his betting shop, but has made an equal profit laying bets on an exchange, the bookmaker has no liability to pay levy, while the betting exchange is liable to pay the levy on the bookmakers' profits on the exchange, without being able to set off the losses made through his betting shop. ”
“18. … If a customer uses more than one exchange as a layer, he cannot offset losses he makes on one exchange against profits he makes on another. By contrast, a bookmaker with a chain of shops may offset losses made in one shop against profits made in another. Thus, an individual who lays bets on exchanges may incur a substantial levy liability even though he has made no profit from laying bets on horseracing. This cannot happen to a traditional bookmaker under the 42nd Scheme, who is only taxed on the overall gross profit he has made from laying bets on horseracing. 20. This particular element of the 42nd Scheme will seriously impede the efforts of new betting exchanges to enter the market, if the levy is to be passed on to layers. Customers wishing to lay bets (as the great majority do) are much less likely to experiment or use more than one exchange, if in doing so on an infrequent basis they risk building up a large levy liability which cannot be offset against their losses on other exchanges. ”
“2. I understand that a point has arisen as to whether a minuted comment of Mr Bartlett misled members of the Board as to the position of betting exchanges, and in particular into thinking that Betfair had dropped its insistence on a cap and that Sporting Options had dropped its insistence on a commission-based levy. 3. Betfair’s insistence on a cap was set out in its written submissions with which Board Members had previously been circulated. Sporting Options’ insistence on a commission-based levy had been communicated to me and to the two independent members at a briefing with Mr Brack who had met with a representative of Sporting Options [confirmed by Mr Brack]. 4. I did not take it, from any comment made at the meeting or otherwise during the day, that this position had changed. 5. Moreover, I can say from my recollection of the formal discussions and the informal discussions which took place in between the formal sessions of the meeting, that I was and I believe all the Board members were aware in general terms of the position of Betfair, Sporting Options and Betdaq [another betting exchange] in relation to contributions by them to the levy.”
“3. The minutes of the Levy Board meeting on 31 October … were not a verbatim account. The meeting commenced at 11am and as I recall, did not finish until approximately 6.45pm. Though of course there were a number of adjournments during which individual members discussed various issues, the notes only consist of some 8 and a half pages of text and represent only a summary of the discussions which took place between Levy Board members at the meeting. Moreover, the notes do not include reference to discussions between Levy Board members which took place during the various adjournments.”
“4. The record indicates that I confirmed, in response to a question concerning the capacity of betting exchanges to pay levy, “that the betting exchanges were willing to pay either on an assessment of the profits of their successful layers, or on their gross commissions, but not on both.”
“8. It is alleged that I wrongly stated that the basis proposed in the Recommendation of the Bookmakers’ Committee was different only in detail from the basis on which betting exchanges are assessed for gross profits tax by Customs and Excise … The important point I was making was that the Recommendation was based on assessing profits from layers rather than on commission and in that respect was similar to the method of assessment of GPT used by Customs & Excise.”