Bookies fear a Budget raid on big-earning casino machines

Robert Lea
20 Apr 2009

The big bookmakers are being warned they could be hit by a multi-million pound tax raid on their moneyspinning earnings from betting shop casino machines.

The raid which may be unveiled in the Chancellor's Budget on Wednesday could immediately reverse the tens of millions of pounds the industry is reckoned to have trousered after 100-1 rank outsider Mon Mome won the Grand National earlier this month.

Bookmakers are taxed four ways by the Treasury: corporation tax on profits and VAT; gross profit tax (GPT) at a rate of 15% on their net revenues; and amusement machine licence duty (AMDL), which works out at about £2100 a year on an in-shop video casino machine, known as fixed odds betting terminals (FOBTs).

Analyst Ivor Jones at City broker Evolution believes the taxman could be taking a long look at the rate of gross profit tax and at taxing FOBTs.

"The amount the bookies are making from FOBTs will attract the Treasury and nor will the result of the National have escaped the attention of a cash-strapped government," he said. "The Budget is going to be a big hurdle for the bookmakers to clear."

Experts say the gross profit tax on net revenues could easily be raised to 20% since the 15% rate was an arbitrary rate unchanged for much of the past decade. Others believe casino gaming machines will be of most interest to the Treasury.

The FOBT casino machines have bankrolled big bookmakers in the face as income from traditional betting on the horses or dogs fell.

Last year the big two, Ladbrokes and William Hill, between them made more than £500 million from FOBTs.

Although restricted to four such machines, the average betting shop is making up to £2500 a week from the terminals - in excess of £125,000 a year, on which they are paying duty at an effective rate of less than 7%.

A tax on the machines could seem attractive since bookies have been accused of using them to target gambling addicts.