Other Income

Gaming Machine Meters And Payout Ratio

H M Revenue & Customs won an important case concerning the assessing of VAT on gaming machine receipts, ‘Hanslope Working Men’s Social Club’.

The club’s gaming machine meters recorded the number of ten pence coins paid in and the number paid out as winnings. The machines payout ratio were set at 72% of ‘coins in’. the readings corresponded to this ratio, but they indicated shortages since the machines were installed. Subsequent checks over a week and test plays by H M Revenue & Customs Officers showed that the meters appeared to be reading correctly.

H M Revenue & Customs were successful in winning their case because they showed that over the entire period since installation the meters showed the correct payout ratio. For the meter readings to be wrong both meters would have had to have failed at the same time, which was unlikely, let alone to have failed on both machines owned by the club.

H M Revenue & Customs were successful in their case even thought the club had controls over the emptying of the machines and the tribunal accepted that the club’s officers were responsible persons and honest witnesses. To ensure compliance with the law and to protect against accusations from members, club officers need to adopt strict procedures when emptying machines. Set out below are recommended procedures.

1. The key to a gaming machine should not be held by one person. At least two officers should be responsible for emptying and counting the cash from machines. Each time a machine is emptied and counted a member of the club selected at random should be asked to oversee the procedures. The count should be undertaken in full view of the membership.

2. Before the count is undertaken the machine tubes should be refilled to the same level each time. Unless this is done it will not be possible to subsequently reconcile the meter readings.

3. A ‘machine income’ book should be kept to record the count. The book should be signed by all parties involved in the count. A separate record needs to be kept for each machine together with the relevant meter reading.
The meter readings should them be reconciled to the cash count. Normally, two readings in units of 10p are given. ‘Coins in’ and ‘Coins out’. In this example the payout ratios is set at 78%:-

An accurate count will help the officers of a club to monitor the performance of a machine and help detect problems at an early stage.  Poor returns may mean the machine’s location or the machine itself needs to be changed.