Shares in William Hill were down slightly on the FTSE 250 after the gambling group said its Online division would be setting up a new telephone betting operation in Gibraltar, while closing its British based telephone betting subsidiary, William Hill Credit Limited (WHCL), in order to avoid high taxes.

All of William Hill's current telephone customers will be serviced from the new operation in Gibraltar, which is being undertaken with the help of outsourced management provider Vertex.

Vertex will takeover William Hill's Sheffield call centre, while William Hill will manage customers from Gibraltar. However William Hill's Leeds call centre is to close, although staff will be offered alternative positions, the company said.

The group said that the changes would mean an improved service for its customers and would allow those with telephone betting accounts to be able to perform online transactions.

William Hill said it expected to make the changes in the final quarter of 2010 and would save four to seven million pounds per year as a result, following the implementation cost which is expected to be around seven million pounds.

In addition to the geographical changes William Hill said that profits and losses from its Online business would be retained by it from now on and would not be shared with Playtech, with which it had a joint venture. Instead Playtech will receive an annual telephone betting support fee of £0.5 million.

The telephone betting business is expected to make a small operating loss in the first half of 2010, following a loss of £1.8 million in 2009.

Ralph Topping, Chief Executive of William Hill, said, "This significant change to our Telephone business is a response to the challenge of competing with betting exchanges and offshore telebetting operators, all of whom have benefitted from significant cost and tax advantages over UK bookmakers. This has made it impossible for our existing business to compete profitably from the UK."

Last year William Hill paid £265 million in taxes and levies.

By 16:29 shares in William Hill were down 0.57 per cent to 173.10 pence per share.