MACHINE GAMES DUTY
Machine Games Duty started 1st February 2013!
What HMRC says:
If you are responsible for premises where Cash Prize machine games will be available for play from 1 February 2013, you must apply for registration with HMRC.
What it actually means!
If your premises offers a fruit machine, quiz machine or any amusement equipment that can pay out a prize in CASH for example a coin pusher, then a tax of MGD on takings is payable to HMRC at the end of each quarter – to pay this tax, you must register with HMRC, so they can send you a form each quarter to declare the takings and the tax due.
What is MACHINE GAMES DUTY?
- It is the tax payable on the REVENUE of a cash prize machine.
- Amusement Machine License Duty was abolished in Feb 2013.
- VAT on the revenue/takings of a CASH prize machine was also abolished.
- But the HMRC view cash prize machines supplied as ‘hired’ by the operator, so VAT is charged on the ‘hire’
- NB. CASH Prize machine – no CASH prize and the machine is still subject to VAT.i.e. a pool table or jukebox.
- The takings of a CASH PRIZE machine are now subject to MGD Machine Games Duty Tax.
- It is currently [10/2015] levied at three rates:
- A cash prize machine that pays a jackpot of less than £8 pay MGD tax at LOWER rate currently 5% on takings
- A cash prize machine that pays a jackpot of more than £8 pay MGD tax at the STANDARD rate, currently 20% on takings.
- MGD of HIGHER Rate is payable if it costs more than £5 to play
Machine Type Cost to play Prize Rate Type 1 – lower rate 20 pence or less £10 or less 5% Type 2 – standard rate 21 pence to £5 £11 or more 20% All others – higher rate More than £5 Any 25%
Who needs to register and pay Machine Games Duty?
- You’ll need to register with HM Revenue & Customs (HMRC) for MGD and pay the duty if you hold the relevant licence or permit.
- In Great Britain the relevant licences or permits are:
- premises licence for gambling activities under the Gambling Act 2005
- family entertainment centre gaming machine permit
- club gaming permit
- club machine permit
- prize gaming permit
- Licensing Act (England and Wales) 2003 premises licence for sales of alcohol, and the equivalent under the Licensing (Scotland) Act 2005 – however in the case of a tenanted pub, where the licence is held by someone other than the tenant, the tenant will nevertheless be a person liable to register for MGD (club premises certificate granted under Part 3 of the Licensing Act 2003)
Machine Games Duty Registration
To register: Either:
· Go to HMRC online and complete form MGD1 and post it directly to HMRC.
How to Administer MACHINE GAMES DUTY
- Sharing Revenue with your cash prize machine Supplier?
- Your machine supplier will provide you with receipts each time they cash up the takings.
- The receipt will detail the NET takings [after the prize hopper has been replenished]
- and the amount of MGD tax that will be left with you at premises.
- In accordance with Business tax – Notice VAT Notice 701/29: betting, gaming and lotteriesThe receipt that is left at premises by the machine owner contains important information for your accountant:
- [MGD] Machine Games Duty Tax to be paid to HMRC
- VAT on machine ‘hire’ to be RECLAIMED
A gaming machine [Owner] operators business is to HIRE machines to customers
The 100% takings earned from that gaming machine effectively belong to the landlord. So he is liable for the MGD tax due.
But he can only earn that if he has hired that machine from the gaming operator.
Effectively the landlord pays a share of his takings to ‘Hire’ the machine:
A hire charge is subject to VAT.
This VAT is RECLAIMED by the Landlord.
I have Registered as the person liable to pay the Machine Games Duty
- When your registration is complete you will receive a certificate of registration from HMRC.
- Keep it safe as you would a VAT certificate
- Not received your certificate?
- Check if your registration has been processed here:
How to Pay MGD over to HMRC
- MGD is payable quarterly. And unless you advise HMRC differently [ i.e. that you are a seasonal business] then the quarters are generally MARCH, JUNE, SEPT & DEC.
- HMRC will send you a RETURN to complete with the following details:
- Total Net Takings of Cash Prize Machine £
- MGD tax due @ 5% £
- MGD tax due at 20% £
- the MGD due should be totalled and payment submitted with the return
..and there’s more…
Amusement machines that do not give out a Cash Prize remain subject to VAT.
And as supplier of such games we will continue existing arrangements and collect the total VAT payable on the machine revenue and submit that payment to HMRC with our quarterly return.
Please note: As machine suppliers we are obliged to ensure that our Cash Prize machine customers have successfully registered for Machine Games Duty:
EVERY premises in the UK that provides a Cash prize machine is legally obliged to register.
You will be provided with a REGISTRATION CERTIFICATE by HMRC, which must be kept safely just like a VAT Certificate. To be able to continue to offer a fruit /gaming or cash prize machine your certificate must be available for inspection .