On February 1st, 2013 an important change in the law regarding ‘games machines’ came into force and it affects most pubs who have either a fruit machine (AWP) or quiz machine (SWP).
The government has decided to change the way those that operate games machines, that pay out a prize, have to pay tax on them. Up to now this has been done by means of VAT (on the income) and a flat rate duty called Amusement Machine Licensing Duty (AMLD). It’s important that you know how this will affect your pub now so that you can prepare for the change when it comes into force.
The new ‘tax regime’ will replace the VAT element and AMLD with a new variable rate of tax called Machine Game Duty and the amount of duty you pay will depend on how much income you derive from your machines.
This guide will help you understand the registration process, the way that you have to work out how much duty you owe and how you have to pay it.
As with all matters relating to tax you should seek professional advice from your accountant, this article is meant for your guidance only.
What is Machine Game Duty?
As mentioned above, Machine Game Duty (MGD) is a new way of taxing fruit and quiz machines and comes into effect on February 1st, 2013. Pubs that have what is called ‘Category C’ machines (fruit and quiz machines) will have to pay one of two levels of duty:
- MGD will be charged (and you will have to make payment) on 20% of the net cash-box income (i.e. takings less winnings, refunds, refills and, if applicable, your landlord’s share) for those machines that cost the customer over 10p per play and offer a prize of £8 or more (be this in cash or in the form of any tokens or vouchers). If you have a landlord and they take a share of your machine income, they are responsible for paying duty on their share of the net income; you will pay the duty you owe and any rent etc for the machine from your share of the cash box. (You should ask your landlord on exactly how this is going to be calculated and how their share etc is going to be collected, as soon as possible).
- For machines that cost the player 10p or less per play or pay out less than £8 (these machines are generally “grabber” or “crane” machines … most pubs don’t have these in place, so most pubs will be paying the higher rate).
Who is responsible for working out and paying MGD?
The operator of the machine is responsible for registering with HMRC, working out how much duty is due and for paying HMRC what is due. In the case of free-houses and tenancies/leases this will mean the owner of the business i.e. the tenant / lessee / free-house operator. (If you work for a managed house operator, your company will deal with all of this and instruct you accordingly).
In certain circumstances you can appoint an ‘agent’ to deal with registration, completing the necessary tax returns etc, although you will still be responsible for paying any MGD that is due on your machines. You may wish to appoint your accountant as your agent, in the same way as you do in terms of VAT or income tax matters.
How do I register? When do I register?
The registration process: HMRC is allowing registration on paper and online via the HMRC website. You may face a financial penalty if you fail to register within the timescale dictated by HMRC when you take on a pub or install games machines. If you operate more than one pub you can register all your machines at just one address (i.e. your head office or ‘primary business address’).
If you currently don’t have machines that are liable to MGD at your pub you must register any machines you intend to operate at least 14 days before they are due to be installed or played.
The MGD register will be open to public inspection, so if you have one, your landlord will be able to check and see if you have registered.
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