New Gaming Machine Tax will affect South West businesses

The new Machine Games Duty (MGD) which has raised the tax on gaming machines, passes into law on 1 February 2013 but the registration process required for all premises from which dutiable machines are provided for play opens next week.

MGD, which replaces Amusement Machine Licence Duty and VAT on gaming machine operations, was announced in last year’s Budget to a chorus of protest from operators including the British Beer & Pub Association (BBPA), the Association of British Bookmakers (ABB) and BACTA the representative body of the British Amusement Industry.

The industry was hoping for a tax neutral rate of around 15% but was bitterly disappointed with the 20% band which the bookies association believe will put 2,600 betting shops and 11,000 jobs at risk and with the already beleaguered pub trade anticipating the loss of a valuable, multi-million income stream.

Paul Collings, a partner with chartered accountants Francis Clark said: “The standard rate of MGD will be 20% but in some instances where the maximum stake is 10 pence and maximum cash prize is £8, a lower rate of 5% will apply.

“However, there is a further sting in the tail.  Because the new duty also replaces VAT, businesses will now be unable to reclaim a proportion of the VAT on purchases.  This will increase the costs of buying or hiring machines and increase the costs of property upgrades and construction work.

“MGD applies to quiz machines, most types of fruit machine, ‘10p pushers’ and skill with prizes style games. In addition to the impact on the pub trade and betting shops, increasing the indirect tax on operating gaming machines will clearly have a big impact on amusement arcades which are part of the fabric of our seaside towns.”

Registration for existing business starts on 1 November 2012 and closes on 31 December 2012 and those required to register include anyone holding a licence/permit which allows them to provide gaming machines on premises, those who own, lease or rent premises at which games may be played, anyone who shares in the profits from machine game play or is responsible for the management of premises at which machine games may be played.

For ‘new’ businesses, HMRC must receive your application at least 14 days before machine games are made available to play.

Paul Collings added: “The new duty is likely to have a big impact on all sizes of business which operate gaming machines but it will affect different businesses in different ways.  Anyone needing to register should start planning their machine acquisition programme well in advance and undertake some financial forecasting if they want to know what this new tax liability will actually cost them”