Wednesday 28 November 2012

Jackpot! - Machine Games Duty

HMRC has provided the ICAEW Tax Faculty with a wee note about Machine Games Duty (MGD),  which replaces VAT from 1 February 2013.

Here is the article in full:
"Machine Games Duty (MGD) is a new tax which is being introduced on 1 February 2013. It will replace VAT currently charged on the income from gaming machines and Amusement Machine Licence Duty (AMLD).

MGD will need to be paid on the profits from most machine games. A machine game is a game played on a machine for a maximum cash prize greater than the cost to play. This means that a gaming machine or a skills with prizes machine (SWP) may be a machine subject to MGD.

Someone responsible for premises where machine games are played on which MGD will be due must register for the duty with HMRC. In many cases the person responsible for premises will be the person who holds the licence or permit which allows machines to be provided for play on the premises. In certain circumstances more than one person may be responsible for particular premises - in these circumstances only one person needs to register.

What is happening and when?

The MGD online registration service was launched on 1 November 2012. If machine games will be available for play on 1 February 2013, those responsible for premises must apply for registration before 1 January 2013 to avoid a penalty.

The MGD online registration service will enable applicants or their agents to register for MGD online and make changes to their registered business details online.

Over the coming months, the service will also let registered people and agents submit and view returns online.

Machine Games Duty for agents

HMRC's Machine Games Duty for Agents service allows agents to carry out a number of tasks online on behalf of their clients.

Key features of the service include:
  • setting up online authorisation to act on behalf of clients
  • changing client's registration details
In time, the service will also allow agents to:
  • submit client's MGD Returns online
  • view client's MGD Returns that have been submitted online
Points of interest

Those responsible for premises on which dutiable machines will be available for play at 1 February 2013 will be able to register for MGD from 1 November 2012.

Registrations in respect of existing operations must be made before 1 January 2013 to allow HMRC to process applications in plenty of time before 1 February 2013.

Businesses which have registered online for MGD will be automatically enrolled for the MGD online service. An ‘activation’ code (sometimes referred to as a PIN) will be sent in the post to the business address. This is required to activate the MGD online service.

Find out more about Machine Games Duty Online
Find out more about How to sign up for Machine Games Duty for agents"

Fair enough.

Now here's what they haven't told anyone about the resources allocated for this, but loyal readers with long memories may recall I wrote about this in March of this year.

The resources for the implementation of the tax (ie staff and computer systems) is, so I am advised,  woefully inadequate. Currently the UK has approximately 1000 Bookmakers, 300 Bingo companies, 4 or 5 Pool Betting operators and about the same number of casino operators - plus the national lottery. AMLD licenses, whilst large in number, are usually issued to traders on an annual basis as there is an advantage built in to getting 12 month licenses, and it is fairly cut and dried if the tax is being paid.

Under the new system there will be another 42,000 quarterly returns, thus massively increasing the workload of HMRC's accounting centre.

How many extra staff will HMRC allocate for this increased workload?

Approximately 12-15 extra staff (about double the current number), they will help to input the forms. Unfortunately, despite Phil Pavitt's alleged superhuman abilities, the new computer system was not yet available for them to train on. I am also advised that the budget for development of the computer system was already "more than spent", with nothing to show for it.

Now I can hear some wise heads tutting, and asking why input is not done online (as HMRC prefers for so many other taxes etc). Well it seems that the Treasury insisted that traders be allowed to put in paper returns, and as you can see from the HMRC statement online submission of tax returns is not yet possible.

The origins of MGD can be found in the systems from Australia and New Zealand tax authorities, except that in Australia and New Zealand there are enforced computer audit functions and bank accounts from which the tax authority can take the appropriate tax amount.

Additionally, the UK legislation does not force traders to keep individual machine records. This means that the tax is almost impossible to audit, and it will make it difficult to work out what the traders' normal tax liabilities are from the start.


Yes, the tax covers two categories of machines which therefore need to be known and identified.

Did HMRC warn HMT that this new tax won't work?

I am advised that they did, bit that the warnings have been ignored!

Sadly another accident waiting to happen, which will be blamed on HMRC (even though in this instance it appears not to be HMRC's fault).

Tax does have to be taxing.

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1 comment:

  1. HMT should consider this SNAFU ASAP.

    Recollection of the "customer" base for this particular section of the taxbase is that "suppression" is a way of life, don't forget this is a total cash based business where the takings totalled, sometimes by a third party pn the case of pubs and clubs or by honourable members of the Showmans Guild, you know, the ones that operate seasonal, fixed and travelling fairs.
    If my memory serves me further HMC&E's, Excise maintained gaming machine licence data frequently was years out of date and when computerised had to be manually cross-checked for accuracy plus physical audit just in case.
    Off-record takings were the least of HMC&E's problems, what with off-record machines and arcades they stood no chance.
    So, what has happened since then to improve things?
    Oh, yes, the Muppets came to town...
    Cue hysterical laughter!