Machine Games Duty (MGD)
Machine Games Duty, the new tax on machine games which replaces VAT and Amusement Machine Licence Duty was introduced on 1st February 2013.
All gaming machines which offer cash prizes larger than the cost to play will come under MGD. This also includes machines such as quiz machines and other skill machines.
All pubs with gaming machines and other machine games need to be covered by an MGD registration and should have already registered with HMRC. You will be liable to penalties if you have a dutiable machine available for play and you haven’t registered!
MGD is due on the total net takings from the machines. There are two rates of duty:-
- lower rate 5% – where the maximum cost per game is 10p and the cash prize is £8.00 or less
- standard rate 20% – this applies to all machine games subject to MGD which aren’t covered by the lower rate
If a machine offers games subject to the two rates of duty then all the games become subject to the standard rate.
If you’ve been used to calculating vat on the net takings you will have been paying one sixth of your takings as vat. If you pay standard rate MGD you now have to calculate MGD on the gross takings which means one fifth of your takings is taxed.
It must also be remembered that the income from gaming machines is now exempt income and partial exemption rules have to be considered when preparing vat returns.
Detailed information on this new tax can be found at: http://www.hmrc.gov.uk/machinegamesduty.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.
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