MGD is due on the total net takings from your machine games for which duty is payable. Net takings means what’s charged to play the games minus the amount paid out as winnings.
Winnings includes the cost of non-cash prizes given out on machines that are subject to MGD. If you don’t know the exact value of the non-cash prizes, you can use a reasonable estimate.
If a machine offers both dutiable machine games and others - for example ‘just for fun’ games that don’t offer a prize – MGD will be due on the net takings and the rest will be subject to VAT.
If you can’t give exact figures, you can sometimes use an ‘apportionment’ - that’s an estimate - as long as it’s been based on a reasonable method.
HMRC might accept the following reasons for apportionment:
• The rate of duty changed during your accounting period and you can’t calculate what the takings were before and after the change
• You have a good reason why you can’t calculate exactly which takings came from standard and which from lower rated machines games, or from games liable to duty and those which are not
• The type of machine game you offer to customers during the accounting period changes - for example, from a lower rated machine game to a higher rated one - and you can’t work out which period the takings were from
• You can’t calculate the exact value of a non-cash prize - for example, because you bought prizes in bulk and some were used in machines that are not liable to duty
HMRC may want to check that you have good reason for not being able to provide exact figures and that the apportionment method you are using produces a reasonable and fair result.
There are 2 rates of duty for MGD:
• lower rate 5% - for machines where the maximum cost per game (the ‘maximum stake’) is 20 pence, and the cash prize is £10 or less
• Standard rate 20% - applies to any machine games subject to MGD that aren’t covered by the lower rate
If a machine has several games and one or more is subject to the standard rate, all of the games on that machine are then subject to that rate. This applies whether or not some of them would normally be charged at the lower rate and regardless of whether anyone actually plays the standard rate games.
Read section 13 of Notice 452 Machine Games Duty for more detail about working out how much MGD you need to pay.