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, the Bureau can reveal.

We have seen confidential documents and visited several casinos as part of an investigation into the way gaming duty arises on electronic roulette machines.

We have established that it is possible for casino companies to shift income – and as a consequence gaming duty liabilities – from highly popular venues in London to less lucrative operations hundreds of miles away.

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 we have discovered 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 to play 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 has 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 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 so pays gaming duty arising 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 as 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 urgently crack down on this.”

Rank Group and Aspers acknowledge there is an indirect and marginal tax benefit arising from the live feed arrangement.

But 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”.

The company, according to the document we have seen, believed it could achieve millions in tax savings once it extended the practice to its other casinos. Savings, the document stated, could increase once their machines were upgraded.

Rank states in the last year its tax benefit through this arrangement was less than £250,000.

The document shows Ernst & Young, Rank’s audit and tax adviser, was involved in the “project”.

Ernst & Young said it could not comment on individual clients but added: “Clients seek our advice on a wide range of issues, including the most appropriate tax planning that is in compliance with the applicable laws and rules.”

Wheels of fortune

With some London venues generating as much as £57m in revenues, casinos can face 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.

The rate at which gaming duty is charged increases steeply with gambling revenues in individual casinos.

On the first £2.35m, the Treasury charges 15%. The next £1.62m is taxed at 20%. The duty then rises in increments of 10% up to a maximum of 50% on casino revenues from gambling above £5.98m.

Casino visits

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 sited within 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 from one casino to another 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 roll out,” said a Rank spokesman.

The company added: “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%.”

When the Bureau visited the Aspers casino in east London – Britain’s biggest – we 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. They each said the machines now take live feeds from a wheel housed at Aspers’ Newcastle casino. Aspers confirmed 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 £17.3m to the year June 2015, while stated average daily attendance in the north-east venue fell 2% to 1,706 people.

The accounts also show that Aspers (Newcastle) Ltd paid £3.6m in gaming duty in the period – up £1.6m or 85% on the previous year.

Aspers (Stratford City) Ltd, meanwhile, enjoyed a 2% rise in total revenue to £57.1m in the year to June 2015 and a 4% rise in “spend per head”. Its average daily attendance fell slightly by about 2% to 4,171 people, while gaming duty stayed constant at £17.1m.

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.

Eastenders

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 £1m 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.

Newham Council said: “We thank the Bureau for bringing this matter to our attention. We have arranged to meet with Aspers to discuss this in the near future.”

Aspers strenuously denies that Newham may have lost out. The Stratford Casino, Aspers said, has exceeded agreed targets in the revenues it has delivered to Newham in each year of its agreement with the council. Revenues have increased annually.

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 or strategy to avoid gaming duties. Any marginal and indirect tax benefit is incidental to the introduction of the live wheels to increase customer choice and satisfaction.”