Owners and tenants of premises operating gaming machines only have a few days left to register for the new Machine Games Duty (MGD) or they could face penalties imposed by HM Revenue & Customs (HMRC).
Schedule 24 to the Finance Act 2012 introduced a new duty of excise, known as Machine Games Duty, to be charged on the playing of dutiable machine games in the UK. This was followed by the Machine Games Duty Regulations 2012.
Under the regulations, premises need to register before 1 February 2013 and HMRC has already indicated that any applications received after 11 January may not be processed before the system comes into force.
So we recommend that if you have not already submitted the application for registration then you do so without delay.
What is MGD?
MGD replaces the current taxation regime for all gaming machines (currently Amusement Machine Licence Duty (AMLD) and VAT) if the machine offers a cash prize. This will result in machines becoming VAT exempt and instead becoming liable to a tax on net cashbox (i.e. gross takings less winnings, sundries and refills).
Generally speaking, MGD will apply to Category C gaming machines (otherwise known as AWP's or fruit machines), Skill with Prizes machines (otherwise known as SWP's or quiz machines) and Category D machines where a cash prize is offered.
This is different from the current taxation regime where AMLD is not payable in respect of SWP's and Category D machines; those machines will now be taxed under the new MGD regime.
MGD is chargeable on all machines where a cash prize exceeds the stake. The charge will be 20% of net cashbox for machines with stakes over 10p or cash prizes over £8, or 5% with machines with stakes below 10p and prizes of £8. Accordingly, machines in most premises will probably fall within the 20% category.
Who has to pay?
Liability for MGD will rest with the owner/occupier of heritable or freehold properties, or the tenant in the case of tenanted premises. In respect of managed pubs, liability will rest with the overall pubco. As stated, companies/operators need to be registered for MGD ahead of implementation of the new regulations on 1 February 2013.
You can have an agent appointed to act for you in respect of your MGD affairs - you will need to authorise the appointment to HMRC and your agent can then register you and complete Returns on your behalf, but you will of course retain actual liability for the new Duty yourself.
When to apply
The registration process opened on 1 November 2012 and, as stated above, HMRC advice is to have the application submitted before 11January 2013 to ensure processing can be completed by 1 February.
That said, the publican's Morning Advertiser in December indicated that 2,196 pubs had had their online registration approved, and 603 had had their paper registrations approved at the time of going to press.
That is a minimal number given that more than 30,000 pubs are expected to be affected by the new Duty and it is of concern therefore that the ability of HMRC to process applications before 1 February, even if they are submitted by the suggested 11January deadline, cannot be completely guaranteed if there is a last minute rush to apply.
If you install a gaming machine in premises after 1 February 2013 you then need to register 14 days in advance before making the machine available to play.
How to apply
Applications for registration can be made online via HMRC's website or alternatively a hard copy of the relevant form MGD1 can be downloaded from the website (or you can contact HMRC by telephone to request a copy be sent to you) then completed and posted to HMRC. When using the postal method, we recommend sending the application by Recorded Delivery.