An internet betting service which allows punters to avoid paying tax on their bets is being launched.

The service, being introduced by bookmaker William Hill next week, will offer the chance to bet on any of the sports and other predictions normally offered.

But customers will not have to pay the standard 9% deduction on their stakes or winnings.

It is the latest move after a string of bookmakers moved to offshore bases to cut the tax burden.

Online gamblers will be able to bet on the National Lottery for the first time because William Hill's website is outside the UK's jurisdiction.

The site - at www.willhill.com - will also show odds on all sports and prices for horse and greyhound racing in "real time".

William Hill is also launching a low rate 3% deduction service for clients placing bets over the telephone.

The offshore telephone service is to be operated via a centre in Athlone, southern Ireland, where the calls will be passed on to the William Hill Bookmaking Company in Antigua.

Close legal loopholes

Spokesman Graham Sharp said: "We have taken this step because our case for reducing betting duty in the UK has as yet gone unanswered by the government.

"We cannot afford to stand by and see our business ebb away."

Chancellor of the Exchequer Gordon Brown has said he is considering using the next Budget to clamp down on offshore betting by closing loopholes in the law.

A treasury spokesman said: "This subject was addressed in the chancellor's pre-budget statement in November and the government made clear that it would be looking carefully at the issue.

"At the moment, it is only a very small proportion of the overall betting industry, and would affect only a small proportion of betting duty received.

'Disappointed'

"But the government recognises that it may increase and will be looking very carefully to see if it needs to take any further action to protect its tax base."

Betting and gaming duties amount to around £1.5bn of the treasury's annual income, but it is not yet known what proportion of this figure could be lost to off-shore internet-based accounts.

In November's pre-budget statement, Mr Brown said: "The government has been disappointed by the actions of a number of bookmakers in using offshore centres to take 'tax-free' bets from UK customers.

"The government takes this threat to the revenue and to the future funding of horse and greyhound racing very seriously.

"The government has ruled out no options for maintaining the revenue from betting and gaming, and maintaining a thriving bookmaking and racing industries within the UK.

"As a first step, the government will be reinforcing the advertising ban on offshore bookmakers and is considering what additional measures it could bring forward in the Budget."