A Rule 4 deduction is made when a horse is withdrawn before a race starts but where bets have already been taken.
So an example will help to explain…
If a race is just about to start and most of the bets from the public have been made and then a horse that was prominent in the market can't start the race for some reason, maybe it won't go in the stalls, then the bookmaker has to return all the stakes wagered on that horse because it didn't start.
But the bookmaker has calculated all his prices based on the assumption that all the horses declared will run, so the rules of the betting ring state that he can make a deduction on all winning bets to compensate for the loss of the withdrawn horse, the non starter.
Here's how the Gambling Commission explain Rule 4's
Rule 4 is a general rule of betting which relates to the reduction of winnings when a horse you have backed wins or is placed. They are made when a horse is withdrawn from a race because it becomes easier for the other runners to win. An amount of money is taken out of winnings to balance the effect of the non-runner.https://www.gamblingcommission.gov.uk/news/article/important-lessons-for-the-betting-industry-on-rule-4-application#:~:text=Rule%204%20is%20a%20general,effect%20of%20the%20non%2Drunner.
The amount deducted from winning bets is calculated based on the price of the withdrawn horse, the list below tells us how many pence is deducted from every pound won.
|Odds when withdrawn (fractional)||Decimal equivalent||Scale of deduction (per £)|
|1/9 or shorter||1.11 or shorter||90p|
|2/11 to 2/17||1.18 to 1.12||85p|
|1/4 to 1/5||1.25 to 1.20||80p|
|3/10 to 2/7||1.30 to 1.29||75p|
|2/5 to 1/3||1.40 to 1.33||70p|
|8/15 to 4/9||1.53 to 1.45||65p|
|8/13 to 4/7||1.62 to 1.57||60p|
|4/5 to 4/6||1.80 to 1.66||55p|
|20/21 to 5/6||1.95 to 1.83||50p|
|Evens to 6/5||2.00 to 2.20||45p|
|5/4 to 6/4||2.25 to 2.50||40p|
|8/5 to 7/4||2.60 to 2.75||35p|
|9/5 to 9/4||2.80 to 3.25||30p|
|12/5 to 3/1||3.40 to 4.00||25p|
|16/5 to 4/1||4.20 to 5.00||20p|
|9/2 to 11/2||5.50 to 6.50||15p|
|6/1 to 9/1||7.00 to 10.00||10p|
|10/1 to 14/1||11.00 to 15.00||5p|
|Over 14/1||Over 15.00||No deduction|
So lets run an example.
Let's say you bet £1 on a 10/1 shot that wins. Normally you would expect a return of £11 (£10 profit plus your £1 stake) giving a £10 profit.
But lets say a horse priced at 7/1 didn't start because it got kicked by another horse before the race started and the vet deemed it unfit to run.
Now you have a 10 pence in the pound reduction, so for every pound you would have got back you now only get 90 pence.
So your £11 return becomes 10 x 90 pence which is £9 plus your £1 stake, so £10 returned.