Our tax preparation specialists tell you everything you need to know if your business includes machine games

At DSR Tax Claims Ltd, we know that calculating the duties your business owes can be hard work,. That’s why our experts want to help make life as easy as possible for you by sharing our specialist knowledge with you. So, whether you are wanting more information about VAT or need to know about charitable tax relief, our handy guides are here to help. All our information is based on HMRC sources, so you can rest assured that these guides are filled with helpful and accurate information.

What is Machine Game Duty?

Machine Games Duty (MGD) is a type of tax that your business is liable for if your premises hold machines which give cash prizes. Examples of these kinds of machines are slot machines, fruit machines and quiz machines. It also includes any other form of gaming or ‘skill with prize’ machine.

If the prize is less than the cost to play, you don’t have to pay MGD. You also don’t have to pay it on any takings your business gets from the following:

  • Charity events
  • Tournaments
  • Lottery machines
  • Machines for domestic use only.

If you are liable to pay MGD, your takings from the machine games will be exempt from VAT so you won’t have to pay both.

If you are liable to pay MGD, you are required to register for the duty and send regular returns, as well as keep detailed records and pay any MGD that you owe.

Who is responsible for registering and paying for MGD?

If you hold any of the following licences, permits or certificates, it is your responsibility to register and pay MGD:

  • Bookmaking office licence
  • Bingo club licence
  • Alcohol premises licence
  • Gambling premises licence
  • Prize gaming permit
  • Amusement permit
  • Family entertainment centre gaming machine permit
  • Club premises permit
  • Club gaming permit
  • Clun machine permit
  • Registration certificate (including a club registration certificate)
  • A Northern Irish licence to sell alcohol.

If you are a tenant of a pub, it is your responsibility to register for and pay MGD and not the premises licence owner (who is usually also the premises owner). However, you will need to cancel your registration once you leave the tenancy.

You aren’t responsible for MGD if you supply the machines, unless you are also responsible for the licence or permit for the premises.

If your premises doesn’t have a licence, HMRC probably won’t ask you to pay the duty but will ask someone else to register and pay the duty – this will probably be the owner or manager.

If you fail to register for MGD when you should, you could face a penalty from HMRC.

How do you register for Machine Games Duty?

You can register online by adding MGD to your HMRC account. You can’t do this if you only have a personal tax account though – you will need to create an HMRC account for your organisation.

You will need the following information to register:

  • Your UTR if you are registered for Self Assessment or Corporation Tax
  • Your VAT number, if your organisation is VAT-registered
  • Your National Insurance number
  • Any licence or permit numbers which relate to your premises
  • How many machines you have
  • If an accountant is going to file returns on your behalf, you will need to know their MGD agent reference number and postcode.

You need to register for MGD at least 14 days before you make your machines available for people to play. You can file paper returns if you wish. You will need to send HMRC form MGD1 if this is the case.

Once you have registered for MGD, you are responsible for keeping accurate records to show how you have worked out your MGD returns and that the amount you have paid is correct. You will need to keep these records for 4 years in case HMRC asks to see them.

How much MGD do you have to pay?

Your MGD is calculated from the total net takings from your machine games. This is worked out as your takings from the machines less the amount you have paid as winnings (including non-cash prizes).

You do not have to pay MGD if the machine is for domestic use. You also don’t pay MGD on takings from charity events, lottery machines or tournaments.

The MGD rates are as follows:

Machine Type How much it costs to play the machine Prize Rate of MGD you pay
Type 1 – lower rate 20p or less £10 or less 5%
Type 2 – standard rate 21p to £5 £11 or more 20%
All others – higher rate More than £5 Any 25%

If the machine has more than one type of game (so is applicable for more than one MGD rate), you pay the rate for the highest rated game on all takings from the machine.

How do you file an MGD return?

Like VAT returns, you file MGD returns every 3 months. You need to file a return within 30 days of the end of the accounting period. HMRC will send you a reminder if you gave an email address when you registered online.

You will need the following information to file an MGD return:

  • Records to show your total net takings from the machines
  • Details showing how you have calculated how much you owe

You will still need to send a return even if you don’t owe any MGD – you will just enter ‘0’ for all the boxes to show that you don’t owe any MGD.

Not only will you have to file a return within 30 days of the end of your accounting period, you will also have to pay your MGD bill too. HMRC may issue you with a penalty if your return or payment is late and they can also charge you an estimate of what they believe you owe so it is a good idea to send your actual figures on time.

If you have chosen to send a paper return, HMRC will send you the forms when your return is due. If you don’t receive them, contact the Gambling Duties helpline on 0300 200 3700. It is open between 8am and 6pm, Mondays to Fridays.

What if you need to change your details for MGD?

You can log into your online MGD account to change the following details:

  • Your contact address, or other contact details
  • Add, change or remove authorised agents
  • Cancel your registration if you no longer trade, no longer have machine games or wish to be registered as part of a group of companies instead.

You can also change your details by phone or post.

If you want to switch to online filing from paper returns, you can register for a HMRC account and sign up for MGD. If you already have an online account, you can just add the MGD service.

How can DSR Tax Claims Ltd help?

We know that setting up a business can be hard work – there’s so much to think about and that’s before you start thinking about various duties and returns. Our friendly team of tax specialists at DSR Tax Claims Ltd are on hand to help make life easier for you. We’re the experts at identifying your maximum allowable expenses so call us on 0330 122 9972 – we’re the tax experts you can trust.