Two of Britain’s biggest casino companies are reducing their tax liabilities as a result of an arrangement involving the way they offer roulette to customers. Uk casino.
On behalf of the Evening Standard, the Bureau of Investigative Journalism has seen confidential documents and visited several casinos as part of a probe into the way gaming duty arises on electronic roulette machines.
The investigation has established that it is possible for casino companies to shift income — and consequently gaming duty liabilities — from highly popular venues in London to less lucrative operations hundreds of miles away. Smaller casinos making less money are taxed at a lower rate.
The arrangement involves beaming live video feeds of actual roulette wheels spinning in casinos outside the capital to electronic slot machines at which punters sit and place bets in London. In this way revenues can be booked away from London with the effect of avoiding higher rates of Treasury gaming duty.
Rank has in the past year started trialling this in three London casinos and two outside the capital. And the investigation found that Aspers, a casino operator co-owned by Conservative donor Damian Aspinall, has been beaming images of live wheels in Newcastle to its huge gambling venue at Westfield’s Stratford City complex in east London.
Customers have the choice of playing electronically from automated wheels in Stratford if they wish. But when they play on a wheel based in Newcastle, revenue is booked there. It is understood Aspers saved up to £850,000 from one casino last year — equivalent to about 5% of Stratford’s gaming duty bill.
Rank and Aspers received tax advice from EY (formerly Ernst &, Young) before implementing the live feeds. There is no suggestion that either Rank or Aspers has acted unlawfully. The companies strenuously deny the off-site feeds are in place to avoid tax although Rank did concede that tax savings “may well have been one of the drivers in exploring the use of remote gaming”.
Both said the live feeds were introduced to enhance customer experience at their London operations after customer feedback.
Genting, another operator with more than 40 casinos in the UK, also beams images of a live wheel from one casino to another. But it books revenues and pays gaming duty where bets are placed, a company spokeswoman said. The flexibility of gaming duty rules means local authorities could also be missing out on revenue from casinos. This is because some councils receive a percentage of local casino revenues in return for giving them a licence to operate. Labour shadow chancellor John McDonnell told the Bureau: “George Osborne needs to crack down on this urgently.”
Rank Group and Aspers acknowledge there is an indirect and marginal tax benefit arising from the live feed arrangement. The Bureau has obtained a confidential internal document from Rank’s subsidiary, Grosvenor Casinos, stating the objective was to beam live feeds from casino to casino “thereby reducing the annual tax liability”.
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The company, according to the document the Bureau saw, believed it could achieve tax savings worth millions once it extended the practice. Savings, the document stated, could rise once their machines were upgraded. Rank states that in the last year its tax benefit through this arrangement was less than £250,000. The document shows EY, Rank’s audit and tax adviser, was involved in the “project”. EY said it could not comment on individual clients but added: “Clients seek our advice on a wide range of issues.”
Some London casinos generate as much as £57 million in revenues, leaving them with hefty gaming duty bills. Gaming duty is a tax levied by the Treasury specifically on all casino gambling revenues — known as gross gaming yield. Rank and Aspers appear to be benefiting from an apparent ambiguity in the duty rules, which state it is levied “where gaming takes place”.
So even though punters place bets in London, it is casinos in cities around the country that book the gambling revenues. When the Bureau visited a central London Grosvenor casino owned by Rank, fixed to the wall in the machine gaming area were large screens showing spinning wheels clearly labelled Northampton and Nottingham.
Customers sitting at the electronic machines in London then have three options: to bet on roulette tables in Nottingham or Northampton, or a fully automated wheel with no dealer involvement in the London casino.
In giving customers at least three choices, Rank has the potential of sharing profits among three separate casinos around the country. Rank is intending to extend the beaming of live feeds to a total of 15 casinos — many of them outside London. “This is customer-demand driven and we don’t believe there will be any duty benefit from this rollout,” a Rank spokesman said.
The company added: “In its last financial year, Grosvenor casinos generated profit of £29 million and paid taxes and duties of around £100 million — a tax and duty rate of more than 77% when the rate of corporation tax in the UK is 20%”
When the Bureau visited the Aspers casino — Britain’s biggest — in east London, it spoke to two separate croupiers who each said electronic machines used to be linked to a roulette wheel in-house. But then, they said, a change was made and the machines now take live feeds from a wheel housed at Aspers’ Newcastle casino. Aspers confirmed that the revenues from those feeds are booked in Newcastle.
According to accounts at Companies House, Aspers in Newcastle saw a 46% jump in total revenues to £17.3 million for the year to June 2015, while stated average daily attendance in the north-east venue fell 2% to 1706 people. The accounts also show that Aspers (Newcastle) paid £3.6 million in gaming duty in the period — up £1.6 million or 85% on the previous year.
Aspers (Stratford City), meanwhile, enjoyed a 2% rise in total revenue to £57.1 million in the same year and a 4% rise in “spend per head”. Its average daily attendance fell slightly by about 2% to 4171 people, and gaming duty stayed constant at £17.1 million.
Aspers’ UK casino business is ultimately owned by two shareholders. Aspinall Investment Holdings, based in the British Virgin Islands, and Crown Resorts, the quoted Australian gaming giant backed by James Packer.
As part of the deal that saw Newham council give the go-ahead to Aspers to operate its east London casino deal, the two parties put in place a revenue sharing agreement.
Aspers confirmed it pays the council “the greater of £1 million per year or a 3% share of the casino’s gaming revenues with the possibility of a further 2% share in certain circumstances”.
As Aspers now books some revenues in Newcastle, Newham council could be missing out. The council said: “We have arranged to meet with Aspers to discuss this in the near future.”
Aspers strenuously denies that Newham might have lost out. The Stratford Casino, Aspers said, has exceeded agreed targets in the revenues it has delivered to Newham each year.
An Aspers spokesman said: “Equally, as part of this highly successful co-operation with the council, Aspers has also delivered more than double the projected local jobs since opening.
“Aspers has always paid all duties and taxes legally required of it. It has never taken part in any deliberate scheme to avoid gaming duties. Any marginal and indirect tax benefit is incidental to the introduction of the live wheels to widen customer choice and satisfaction.”
Britain’s 144 casinos host 3642 electronic gaming machines. Other than roulette, punters can also play blackjack, or punto banco, on these machines. The Gambling Commission does not keep data about which machine games are the most popular but casino-industry insiders suggest roulette dominates this class of gaming.
Gamblers in the most recent 12-month period bet just over £1 billion on electronic gaming machines. Casinos’ overall winnings are £141.9 million, according to the most recent Gambling Commission data.
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Casino gaming yields from electronic machines have increased considerably over the years. In 2009, when the Gambling Commission first started collecting data on machines, the gaming yield was just £101.4 million.
With 58 UK casinos — 11 of them in London — Rank is the country’s biggest operator. In its last financial year, its casinos, mostly under the Grosvenor brand, generated revenues of £401.1 million and received 8.2 million visits. Average customer spend was £48.72.
Writing for a gambling conference publication last year, Rank’s head of electronic gaming Simon Beacham said its casinos house a total of 1700 electronic roulette machines. Combined with 1400 slots, Beacham suggested those machines account for more than 37% of Rank’s entire income from casinos. This, he indicated in the article, was at least £100 million.
The Bureau contacted a Treasury official responsible for the gambling industry. He was unaware that casinos have started moving their revenue points by showing filmed roulette wheels in London. The official said they have not received communication from the compliance team at Her Majesty’s Revenue and Customs on this issue.
HMRC said it “carries out risk based compliance activity for all the gambling taxes” and added, “we do not comment on identifiable taxpayers”.
Nick Mathiason is business correspondent at theBureau of Investigative Journalism