Budget 2012: George Osborne hopes for jackpot from fruit machines tax

Publicans have denounced the 20 per cent levy on takings from fruit machines and other games under a new machine games duty announced by the Chancellor.

The new tax, which replaces the system where pubs are charged VAT as well as a per-machine payment of about £900 a year,will cost the sector £14 million in additional taxes each year, said the British Beer and Pub Association.

Meanwhile, George Osborne also announced changes to the taxation regime for online gambling, designed to bring the industry back to the UK from offshore tax havens.

In future, gambling taxes will be levied according to the location where the player – rather than the game operator – is based.

Announcing the new duty, to come into effect in 2013, Mr Osborne said the VAT charged on gaming machines was repeatedly being challenged by operators in the courts.

“So I will introduce a new machine games duty with a standard rate of 20 per cent and a lower rate for low-stakes and prize machines of 5 per cent of net takings,” he said. The 5 per cent rate will apply to machines paying out very small prizes, such as “grabber” machines in arcades and bingo games in working men’s clubs.

BBPA chief executive Brigid Simmonds said: “Fruit machines and quiz machines are an important part of the fabric of British pubs, a vital income stream and valued by customers.”