It would seem that two of the largest and most popular casino companies in the UK are starting to feel the heavy burden of the high tax rate imposed on the gaming revenue generated. This is why they have come up with a pretty clever way to help fight off the tax liability, and at the same time, help their other casinos located around the country. It all surrounds the electronic roulette machines, which have gotten extremely popular.
Current Casino Problems with Taxes
The two casino operators, the Rank Group, and Aspers, have seen heavy tax liabilities levied against their properties that are located in London. It seems that the Treasury imposes different levels of tax rates depending on the amount of revenue generated:
- The first £2.35M taxed at 15%
- The next £1.62M taxed at 20%
- Increments of 10%, up to 50%, on those that generate revenue above £5.98M
Seeing this discrepancy, the main casinos of the Rank Group, the Grosvenor Casinos stated,
“This is customer demand driven and we don’t believe there will be any duty benefit from this roll out. In its last financial year, Grosvenor casinos generated profit of £29m and paid taxes and duties of around £100m – a tax and duty rate of more than 77% when the rate of corporation tax in the UK is 20%.”
It is no wonder that they are looking for alternate strategies to help them lower the amount paid out in taxes.
The Video Roulette Strategy
With this in mind, the Grosvenor casinos, as well as the Aspers operations have used the law to their advantage. The duty rules state that the tax will be levied “where the gaming takes place.” Using this ambiguous rule, these popular London-based casinos have started using their other operations around the country. They have the roulette wheel at these locations, then send a live feed directly to the casinos in London, where the attendance is much higher. Here, players can make their wagers on several locations that have the feed, through electronic tables.
Even though the bets are placed in London, the actual gaming takes place elsewhere, allowing them to spread the revenue generated to those locations, most of which have better tax breaks. One big example of this strategy working is the east London Aspers casino, which is using their Newcastle location as the base for their feeds. The Newcastle operation saw a 46% increase in total revenue, up to £17.3M as of June 2015, and this was done even though the average attendance fell 2% during that time.
Lawmakers in London are trying to find a way to limit or eliminate this strategy, but it won’t be good for anyone if that were to happen. Casino operators could end up leaving or running their operations elsewhere if they see they will have to pay so much in taxes.
