Ministers’ plans for reforming Britain’s gambling laws were in disarray on Wednesday as a rift emerged at the top of the Conservative party over whether to ban football shirt sponsorship and impose a levy to fund addiction services.

Multiple sources said the process of putting the finishing touches to a white paper on gambling reform had driven a wedge between departments and senior MPs, with the publication deadline just weeks away.

The government is expected to adopt measures including bet limits of between £2 and £5 on online slot machine and casino games, and affordability checks to ensure punters do not spiral into financial ruin.

Inducements, such as free bets or VIP perks are also likely to be banned for customers who are losing heavily.

But MPs pushing for stricter reform reacted angrily to a report in the Times that said football teams would be allowed to carry on displaying betting sponsor logos on their shirts and that – despite widespread support – there would be no compulsory levy to fund addiction research, education and treatment.

Sources familiar with the draft proposals insisted both changes could still go ahead, adding that discussions with Premier League teams about sponsorship were “ongoing” and that the levy could survive, albeit limited to online firms rather than bricks-and-mortar casinos and bookmakers.

However, final decisions are subject to frantic last-ditch lobbying from senior Tories, ahead of the white paper being published in mid-July. “The Treasury is opposed to those two elements,” said one MP with knowledge of the unfolding row.

Officials at the exchequer are concerned that the tax take could fall if the gambling industry’s £11bn-a-year winnings from British punters are reduced, the source said.

That puts No 11 at odds with the Department of Health, which is said to be supportive of a levy to fund NHS treatment, and the culture minister Chris Philp, who is overseeing reforms.

Another faction within the upper echelons of the party, including one cabinet minister, is also understood to be ideologically averse to imposing a “polluter pays” levy on gambling firms.

But Iain Duncan Smith – who has said he is ready to “go to war” with the government over this issue – urged ministers not to dilute the reforms.

“If correct, and government emasculate the white paper, it’s the wrong move, we’ll see a lot of opposition,” said the former Conservative leader, who co-chairs a cross-party group examining gambling harm.

The row has caused further delay to proposals that were originally due to come out in late 2021.

Senior MPs are making representations to No 10 policy adviser David Canzini in the meantime, with those favouring reform believing they can still convince Boris Johnson to back a mandatory levy, replacing the industry’s voluntary contributions.

The levy is backed by the industry regulator, the Gambling Commission, which is expected to get more funding and powers in the white paper, and GambleAware, the charity that acts as a conduit for most of the money spent under the current voluntary system.

The dispute over gambling policy within the Tory party has echoes of the row over fixed-odds betting terminals (FOBTs), which led to the resignation of the sports minister Tracey Crouch in 2018.

Stakes on the digital roulette machines were ultimately slashed from £100 to £2 after MPs from across the House rallied to Crouch’s side, forcing the government into a U-turn on the timing of the policy.

Duncan Smith was instrumental in the campaign to cut FOBT stakes and many of the measures they proposed in a 2019 report are expected to be included in the upcoming white paper.

A spokesperson for DCMS said: “We are undertaking the most comprehensive review of gambling laws in 15 years to ensure they are fit for the digital age.

“We will be publishing a white paper as part of a review of gambling legislation in the coming weeks.”