High street ‘slot farms’ could evade budget tax rise through bingo hall loophole

Hundreds of high street “slot farms” could continue claiming a discount on their business rates, unless the government closes a loophole that allows them to pose as bingo halls.

John Healey singled out adult gaming centres (AGCs) in his first budget this week, in which he increased duty on slot machine takings from 20% to 25%, claiming he was “raising taxes on gambling to support good growth on every high street”.

As well as raising the duty, which will also affect bookmakers and casinos, he said AGCs and vape shops in England would no longer be eligible for a discount on business rates aimed at leisure and hospitality businesses.

The prime minister, Andy Burnham, has been a vocal critic of AGCs and posted on Instagram after the budget to back the policy, a key plank of his pitch to improve British high streets.

However, many shops owned by the UK’s two largest slot farm companies, Merkur and Admiral, could escape the tax tweak, Guardian analysis suggests.

This is because they have obtained bingo licences for venues that appear to offer slot machines almost exclusively. Gambling Commission records suggest that hundreds of slot machine venues may have exploited this loophole.

When the Guardian visited four owned by Merkur and one owned by Admiral, all advertised bingo in their shop windows. However, the shops appeared to offer mainly slot machines inside. Bingo was available only on tablets stacked in one small corner of the room, allowing the venues to operate under a bingo licence.

In at least one case, captured in covert filming, a member of staff said nobody ever used the bingo tablets, and they appeared not to be in working order. The remainder of the venue was dedicated to slot machines offering a £2 spin every 2.5 seconds for a jackpot of £500. These category B3 machines are associated with higher levels of gambling-related harm than most other products, according to several studies.

One so-called bingo venue is the Merkur Slots shop in Stockport, where Wendy Hughes, who had terminal cancer, lost £2,000 over two spells lasting 16 hours. Merkur was fined £100,000 after the Guardian revealed the details of Merkur’s exploitation of Hughes, who has since died.

The Stockport branch of Merkur is among more than 200 arcades that are licensed as bingo venues, according to Gambling Commission records, despite appearing to be geared towards slot machine play. Some data is duplicated, making it hard to measure exact numbers.

Operators could also now convert their remaining AGC licences to bingo.

The Labour MP Alex Ballinger, a co-chair of the gambling reform all-party parliamentary group, welcomed the tax increase on slot machines but urged the government to be vigilant about the loophole. “We must ensure these licences cannot be used to sidestep the new business rates rules,” he said.

He urged the Department for Culture, Media and Sport to proceed with proposals to tighten the licensing rules, amid a consultation. “The government has already recognised this problem, and I am confident ministers will work with the regulator to close loopholes and ensure enforcement going forward,” he said.

The business rates expert Paul Turner-Mitchell of the real estate intelligence company Altus Group said the outcome of the tax change could hinge on how the Treasury defined an AGC and how local councils chose to enforce the rules. “A bingo licence alone does not settle its business rates treatment,” he said.

Merkur and Admiral did not respond to a request for comment.

Joseph Cullis, the president of the arcade operators’ trade body Bacta, said the industry would be hit hard by the tax changes.

“My great-grandfather started our family business back in 1962, and we’ve spent more than 60 years building it into what it is today,” he said. “Like many of the family-run businesses I represent across the sector, this decision will force us to reconsider investment and make difficult decisions about our future. Even larger operators will now be forced to scale back their plans.”