Machine Games Duty (MGD) Explained - Support and Advice

Machine Games Duty

On February 1st 2013 Machine Games Duty (MGD) replaced the old taxation regime for all gaming machines (Amusement Machine Licence Duty and VAT).

This will resulted in machines becoming VAT exempt and becoming liable to a tax on net cashbox at the following rates:

HMRC The introduction of Machine Games Duty
Nothing in this note is intended to qualify or amend anything in legislation.

Dutiable machine games

Machine games subject to Machine Games Duty (MGD) (dutiable machine games) will be those where customers pay to play a game on a machine in the hope of winning a cash prize which is greater than the cost to play. Where MGD is payable, it will replace both Amusement Machine License Duty and VAT.

Where a machine offers a game with both cash and non-cash prizes (mixed game), it is the size of the cash prize alone which will determine whether or not there is a liability to MGD.

There will be no MGD payable on net takings from machine game-play where the play is:

Net takings from a machine

MGD will be due on the net takings from the playing of dutiable machine games.

In the case of mixed games (see above), it will be possible to deduct both the cash prizes and the value of non-cash prizes when calculating net takings. The value of non-cash prizes that can be deducted will include any VAT input tax paid on the purchase of the prize.

Where a machine offers both dutiable machine games and other activities, the net takings from the playing of the dutiable machine games will be subject to MGD with the remainder being subject to VAT.

Everything that can reasonably be described as a free play will be excluded from the calculation of net takings. For the purposes of calculating net takings, it will still be possible to deduct winnings from these plays.

Rate structure

There will be two rates of duty: a standard rate and a lower rate. The rates will be set at Budget 2012.

The lower rate will apply to machines with maximum stakes of 10 pence and maximum cash prizes of £8.
It will be possible to net off losses across all machines for which a person is responsible. It will also be possible to carry across a negative net duty liability to the next accounting period.

Liability for the duty

Where a relevant (as specified in legislation) licence or permit is held for the premises on which a dutiable machine game is located the person holding that licence or permit will be required to register with HM Revenue & Customs (HMRC) to pay MGD. Where no licence or permit is held, certain others with a connection to the premises may be liable for MGD.

If no one is registered for MGD in respect of premises and HMRC cannot identify a person required to register (that is, the person required to register is 'missing') then anyone liable to a share of profits from machine game-play may be liable to duty due on their share. The register (see below) will be publicly available and will allow profit sharers to check whether or not a registerable person with whom they wish to enter into a profit share arrangement is, in fact, registered for MGD.

The register and the registration process

Applications for registration for MGD will be made to HMRC, in advance of machine games being made available for play, on the online system or by means of a paper form.

Where an applicant does not hold a relevant licence or permit HMRC will require details of all the premises in respect of which the applicant wishes to register. However, where a relevant licence or permit is held, details of all premises will not be required.

The register will be publicly 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.

It will be possible for two or more entities to request registration as a group. Group registration will normally be allowed provided that all proposed members are corporate bodies, have a controller in common, are resident in or have an established place of business in the UK, and have given their consent to join the group. It is intended that all members will be jointly and severally liable for MGD due.

Returns and accounting periods

It will be possible to submit returns on the online system or by means of paper forms. It will only be necessary for a registered group to submit a single return in respect of all group members.

HMRC will accept MGD payment by - variable Direct Debit, Bankers’ Automated Clearing Service (Bacs) and Clearing House Automated Clearing System (CHAPS). In situations where HMRC is taking enforcement action to recover a debt it will be possible to make payment by credit or debit card.

The standard accounting period will be three calendar months (organised in three staggers) with a facility for special accounting periods by agreement with HMRC. Returns will be required to be made one month from the end of the accounting period.

Record keeping

Individual machine records will not be required to be kept as a matter of routine. However, HMRC will have the power to direct that individual machine records are kept in circumstances to address compliance risks.

Click here to download HMRC Machine Games Duty Application

For more information regarding gaming permits with your local council, please click on the appropriate link below:

Broadland District Council

North Norfolk District Council

Norwich City Council

South Norfolk Council

Breckland Council

Great Yarmouth Borough Council

Borough Council of Kings Lynn & West Norfolk

Mid Suffolk District Council

Waveney District Council

Forest Heath District Council

St Edmundsbury Borough Council