Corporation and other taxes

Machine Gaming Duty

MGD is a tax on gaming machines which started on the 1st February 2013. MGD replaced both Amusement Machine Licence Duty (AMLD) and VAT. H M Revenue & Customs (HMRC) has published guidelines for MGD, which are summarised below: –

Rate structure

There will be two rates of duty: a standard rate and a lower rate. The rates are expected to be 20% and 5% respectively. Unlike VAT, MGD is calculated in addition to the net takings whereas VAT is calculated as included in the net takings. Thus if the net takings are £100 MGD is £20 whereas under VAT legislation the inclusive figure would be £16.67.

Net takings

MGD will be due on the net takings from the playing of ‘dutiable machine games’, for the purpose of calculating net takings, it is possible to deduct winnings from plays. For all machines for which a club is responsible it will also be possible to net losses on one machine against the profits from another and to carry forward losses, if any, to the next accounting period.

Machines Affected

  • Higher rate 20% – Category B4 (maximum stake/prize £1/£250) Category C (maximum stake/prize £1/£70); and skill machines if they offer a prize higher than the cost of the stake.
  • Lower rate 5% – will apply to machines with maximum stake of 10 pence and maximum cash prize of £8, current Category D.
  • Exempt – lottery machines which comply with the regulatory requirements for Category B3A lottery machines. Takings from pull tab lottery machines will also continue to be exempt from VAT.

Impact on ongoing VAT returns

Gaming machine income will become exempt from VAT. In a very limited number of cases, for example where the club has undertaken major refurbishment, this may affect the club’s ability to recover VAT on gaming machine rental and maintenance costs. This is a complex area, if in doubt professional advice should be sought.

Liability for the duty

Where a relevant licence is held for the premises on which a ‘dutiable machine game’ is located the person holding that licence will be required to register with HMRC to pay MGD. Thus it will be the club not the machine supplier who will be liable for the payment of the MGD, this is the case even if the club has entered into a profit sharing agreement with the machine supplier.

The register and the registration process

Application for registration for MGD must be made to HMRC in advance of games being made available to play.
The register will be publically available in the form of a free online ‘look up facility’. An enquirer will input a postcode and the facility will display address details of all registered premises at that postcode.

Returns and accounting period

Whilst it should be possible to submit paper forms HMRC normally requires clubs to submit returns using their online system. HMRC will accept payment by direct debit, BACS or CHAPS.
The standard accounting period will be three calendar months; returns will be required to be made one month from the end of the accounting period.

Record Keeping

Clubs will have to maintain records to substantiate their MGD returns and the amount declared for payment.