Hundreds of slot farms could dodge rates rise through bingo loophole

What does the budget change?

Gambling Commission records show more than 200 arcades licensed as bingo venues, including Merkur’s Stockport branch, while The Guardian’s analysis suggests hundreds of high-street slot farms could keep discounted business rates unless the government closes the loophole.

John Healey singled out adult gaming centres (AGCs) in his first budget this week. He raised duty on slot-machine takings from 20% to 25%, a change he said would also hit bookmakers and casinos.

Healey also said AGCs and vape shops in England would lose the business-rates discount available to leisure and hospitality businesses. He framed the budget as “raising taxes on gambling to support good growth on every high street.”

Prime Minister Andy Burnham, a vocal critic of AGCs, backed the policy on Instagram after the budget. The Guardian reported that the measure is a key plank of his pitch to improve British high streets.

In short, the budget raises the slot-tax burden while leaving a route around the new business-rates exclusion open.

How can a slot farm hold a bingo licence?

Many shops owned by Merkur and Admiral, the UK’s two largest slot-farm companies, could avoid the rates change, according to The Guardian’s analysis. The companies have obtained bingo licences for venues that appear to offer slot machines almost exclusively.

Gambling Commission records suggest hundreds of slot-machine venues may have exploited that route. Some data is duplicated, making the exact count difficult to measure, and operators can now convert their remaining AGC licences to bingo.

The Guardian visited four Merkur shops and one Admiral shop. All advertised bingo in their windows, but the shops appeared to offer mainly slot machines inside. Bingo was available only on tablets stacked in one small corner, allowing the venues to operate under bingo licences.

In at least one case, covert filming captured a staff member saying nobody ever used the bingo tablets. The tablets appeared not to be in working order, and the rest of the venue was dedicated to slot machines.

The machines offered:

• £2 for every spin;
• a new spin every 2.5 seconds; and
• a jackpot of £500.

The Guardian said several studies associate these category B3 machines with higher levels of gambling-related harm than most other gambling products.

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

In practice, the bingo route could keep machine-led venues inside the discount for hundreds of high-street sites.

Who wants the loophole closed?

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

Ballinger urged the Department for Culture, Media and Sport to proceed with proposals to tighten licensing rules during 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.

Paul Turner-Mitchell, a business-rates expert at Altus Group, said the result could depend on how the Treasury defines an AGC and how local councils enforce the rules. “A bingo licence alone does not settle its business rates treatment,” he said.

Neither Merkur nor Admiral responded to a Guardian request for comment.

Joseph Cullis, 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,” Cullis said.

The coming test is whether ministers tighten licensing and enforcement before more operators convert AGC licences; if not, the 25% slot-duty increase can coexist with business-rates discounts at hundreds of slot farms.