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Tax on gaming machines

Read below to understand the tax on gaming machines and how it works. Contact York Coin Leisure if you need more advice. 


Machine Games Duty (MGD) is a tax on gaming machines. It replaced both Amusement Machine Licence Duty and VAT charged on the income from these machines.
MGD is charged when customers pay to play machine games to win a cash prize that’s more than the cost to play the machine. MGD isn’t payable on machine games that only offer non-cash prizes or cash prizes that are less than the cost to play.
Find details of all the MGD exemptions.
You’ll need to pay MGD on a machine game if both the conditions below are met:
•   The prize - or at least one of the prizes that can be won - is cash, or includes cash
•   At least one of the cash prizes is bigger than the smallest amount that’s paid to play the game

If MGD applies to you it’s important that you complete an MGD return and pay on time. There are penalties for missing the deadlines.
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Register for MGD

If you own machine games that are liable for MGD, you’ll need to register with HM Revenue and Customs (HMRC) and pay what you owe.
You’ll need to register at least 14 days before any machines are played.
Use the MGD Online Service to register for MGD.
If you don’t want to register online you can register by completing form MGD1 Machine Games Duty - Application to register a business.
Before you register, you’ll need information on:
•the type of business you run
•the number of machines you have
•business address
•any correspondence address that is not the business address
•other references, for example National Insurance Number, Unique Trader Reference or VAT registration number where appropriate
Once HMRC has accepted and processed your online application, your name will be added to the MGD register and you’ll receive your MGD registration number by post.
Sometimes HMRC will ask you for security for payment of duty before they’ll accept your application to register. If you’re outside the UK, HMRC might not accept your registration unless you have a tax representative in the UK.

Calculating your MGD

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.
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Want to understand more about tax on gaming machines? Contact York Coin Leisure on
01904 750 445

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