The Department for Culture, Media and Sport (DCMS) has previously consulted on the proposals and maintains the levy, which has been in existence since 1961, has become outdated. Under the current system offshore online betting businesses that take bets on British racing are under no statutory obligation to contribute to horseracing, although some make voluntary contributions.

DCMS plans to bring in legislation requiring any gambling business that takes bets from consumers based in Britain on races held in this country pay 10% of their gross profits from racing, above the first £500,000 they make, to support the sport and the equine industry. The gross profits refer to gross gambling yield (GGY), which is stakes minus prizes paid out.

It will be enforced via a reformed statutory horserace betting levy. The government intends to introduce the new funding scheme in April 2017, subject to receiving state aid approval for the proposals.

Sports minister Tracey Crouch said: ‘This move will help secure the future of horseracing in Britain by making sure that gambling firms pay a fair return to support the sport. Horseracing has a strong heritage in this country, employing thousands of people and is enjoyed by many almost every day of the year. This new approach to the Horserace Betting Levy will help sustain and develop the sport.’

The levy scheme will apply to all operators who offer bets on British horseracing by GB-based customers, including pool betting, betting exchanges, on-course bookmakers and on spread bets.

The sports minister will also review the rate set within seven years of the legislation coming into force to ensure that it reflects any future changes in the market.

The government is to consult on plans to transfer responsibility for collecting the levy to the Gambling Commission in early 2018, which will mean that the Horserace Betting Levy Board will be wound up.

The levy funding will be passed on by the Gambling Commission to a nominated racing authority, that will act on behalf of British racing and be responsible for making decisions on spend.

Nick Rust, chief executive of the British Horseracing Authority (BHA), said he welcomed the announcement of the replacement to the levy, saying it will ‘restore to racing a return from all betting on our sport at a fair and proportionate rate. ‘

‘Once the new system is implemented in April 2017, we will see a significant uplift in the sport’s central funding that will benefit our participants and the many local communities which racing supports across all corners of the country,’ Rust said.