GVC Says It Was Blindsided By Tax Authority

July 23, 2020

- Grant Whittington

UK gambling and betting giant GVC Holdings has revealed that believes itself to have been blindsided by UK tax authorities. GVC is one of the United Kingdom’s largest gambling and betting chains operating at high-street capacity. The gambling giant revealed the latest status of the ongoing to-and-fro between it and UK tax authorities during a Tuesday press-release, at which time it confirmed being the focus of an ongoing tax probe and investigation.

GVC said that despite the fact that it had given its full co-operation to UK tax authorities throughout the course of the pre-investigation proceedings, it now finds itself dead-centre in the drama-circle and being investigated personally as having been privy and party to illegal activities conducted in Turkey during the period leading up to December 2017.

Mislead By The Authorities

The entire ordeal started when GVC was in November last year ordered by Her Majesty’s Revenue and Customs (HMRC) to provide to the tax authority certain information pertaining to its (GVC’s) former Turkey-focused betting site.

The gambling and sports betting giant claims to have been told at the time that the investigation related to payment providers providing products and services to online betting firms serving Turkey-based gamblers. Online gambling was declared illegal in the country in 2006.

GVC furthermore said that since it had already distanced itself from the Turkish online market during December of 2017, it did not for one moment consider itself the possible focus of a large-scale tax investigation – let alone one conducted by English tax lawmakers. According to the betting operator, it had been the manner in which the information had been presented by HMRC that had caused the confusion and subsequent misgivings – misgivings GVC says it now believes to have been purposefully misleading.  

No Clarity From HMRC

Save for references made to the UK’s bribery act, GVC says it wasn’t made aware of any misconduct from a UK-law perspective, and certainly not of any wrong-doing on its own part. HMRC had purposefully kept it in the dark about the real nature of the investigation, claims the operator.

What has proved most disappointing of all, said GVC on Tuesday, was the lack of clarity provided by the local tax authority. The operator says it had honoured its relationship with Britain by cooperating with the investigation but now feels that HMRC has not thought it necessary or proper to return the favour by honouring the trust-relationship.

A Difficult Road Lies Ahead

A prominent UK broker has in the meantime said that the UK tax-probe is bound to create even more investor-uncertainty around the value of and future of GVC shares. The operator’s credit grade is as it is drawing on a global health crisis-induced short straw – a situation that will only be made even worse by the tax controversy.

GVC’s credit grade was in April lowered a complete notch from “BB+” to “BB” and subsequently slapped with a “negative outlook” rating by Fitch Ratings. The negative rating officially pushed the operator into non-investment grade territory.

Fitch at the time explained the downgrade as having been the result of GVC having encountered great difficulty with the “deleveraging” of its balance sheet on par with its market contemporaries carrying “BB+” ratings.

Significant revenue-related challenges have had to be navigated ever since – a situation only mitigated by a resulting increase in online casino games revenue. The UK bookie now faces a sluggish rest-of-year, and a 2021 that will in all likelihood see it flapping about much like a fish out of water as it tries to regain its former market-position and on-par status of performance.

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