Some of the country’s leading supermarkets have launched an appeal against a controversial tax ruling that could mean the end for “hole in the wall” ATM machines attached to stores.

Retail giants such as Tesco, Sainsbury’s and the Co-operative Group are taking the government to the Court of Appeal over costly business rates on cash machines.

The ruling saw that cash machines built into the front of a shop or petrol station should have a separate business rate bill – a move costing the industry almost half a billion pounds.

It diminished retailer hopes of retrieving £200 million in rebates and they also now face a huge £206 million bill for the next five years under the recent revaluation.

The decision sparked fears that small shops and independent petrol forecourts may be forced to close ATMs or start charging for cash withdrawals.

“As bank branches continue to close, ATMs with convenience stores are becoming more in demand,” Dominic Taylor, chief executive of PayPoint told The Mirror.

“With convenience stores playing an increasing role in our local communities, ATMs are not more conveniently located for where people need them, in their local shop as opposed to on the high street.

Backlash over business rates could mean the end for some ATM machines
Backlash over business rates could mean the end for some ATM machines

Now, furious retailers are fighting back in what is set to be a length legal battle.

Retailers are having to fork out £39.3 million a year on cash machines – or almost £2,000 on average for each ATM, according to rents and rates specialist CVS.

While ATMs attached to retailers are having to pay rates, the regime does not apply to free-standing cash machines within stores.

But it still affects many thousands of hole-in-the-wall ATMs, with the number liable for business rates surging from 3,140 in 2010 to 14,068 this year.

The Association of Convenience Stores has raised fears that the tax on ATMs could not only hit small retailers hard, but also deprive communities of vital access to cash.

It wants to see local authorities use funds announced in the Budget for business rates relief to reduce cost burden for under-pressure shops.