|HMRC Reference:Notice 701/29 (February 2013)||View Change History|
This notice cancels and replaces Notice 701/29 (June 2011). Details of any changes to the previous version can be found in paragraph 1.2 of this notice.
This notice explains how VAT applies to betting and gaming in general. It also explains how VAT applies to bingo, lotteries, and machine games.
The technical content of this notice has been updated to take account of developments in the law. From 1 February 2013 exemption will apply to machine games on which Machine Games Duty ('MGD') is accountable (paragraph 9).
The relevant VAT law is Group 4, Schedule 9 to, sections 23 and 23A of, the Value Added Tax Act 1994.
You may also wish to refer to:
The provision of facilities for betting, which includes pool betting, or for playing games of chance, is normally exempt from VAT but there are some important exceptions. You will find out more about these in paragraph 2.2. From 29 April 2009 all participation fees in relation to games of equal chance for a prize became VAT-exempt.
Some betting and gaming facilities are not exempt. You must always account for VAT on:
Even if you fund prizes for your exempt betting and gaming activities from your taxable income you must still account for VAT on your gross taxable receipts.
If you provide exempt facilities for betting or gaming, the value of your exempt output is the full amount of the stakes or takings, less only the money paid out in winnings or, if the prizes are goods, their cost to you (including VAT). You must not deduct any betting or gaming duty payable.
In addition to their conventional games of chance against the house, casinos may hold competitions or tournaments in card room games, such as backgammon or poker. The whole of the participation fee which may be described as ‘table money’, ‘session charge’ or ‘competition fee’ is often put towards the prizes and sometimes the casino puts in an extra sum to make the prizes more attractive. If you hold such competitions, the entry fee is exempt from VAT even though they may make no contribution to your profits.
Entry stakes to card room competitions which are conducted strictly in accordance with guidelines agreed between the British Casino Association and HMRC are outside the scope of VAT.
If you are a pools agent, concessionaire or collector, your services are exempt from VAT. Hence, there is no requirement to account for VAT on the commission that you receive. The services of bookmakers’ agents are exempt, and so are the services of bookmakers themselves when they act as agents in accepting bets for other bookmakers or for the Tote. If these are your only sources of self-employed income you cannot register for VAT.
If you receive income from taxable activities, such as commission from distributing and collecting spot-the-ball coupons, or from providing a lottery management service (see section 5), you must register for VAT if your taxable income from all sources exceeds the VAT registration threshold set out in the current edition of Notice 700/1 Should I be registered for VAT.
If the ‘spot-the-ball’ competition is to determine as nearly as possible the actual position of the ball in the original photograph it is pool betting. However, a competition decided by reference to the decision of a panel of judges is a game of skill. The supply of the right to play games of skill is standard-rated.
'Game of chance' is defined in Note 2 of Group 4 of Schedule 9 to the Value Added Tax Act 1994. Essentially, it is either a game of:
Many other games including any athletic games or sports are not regarded as games of chance. The supply of a right to play games of skill, such as:
is standard-rated. You will therefore need to distinguish carefully between the games of chance and the games of skill which you promote.
This is the money paid by each player which is risked in the game and is returned as winnings to the winning player(s). It is outside the scope of VAT as it is not consideration for any supply by, for example, the gaming club to the player.
A session or participation charge is a charge made to play, often (but not always) separate from the stakes risked by players in the game.
A lottery is the distribution of prizes by chance where the persons taking part make a payment or consideration in return for obtaining their chance of a prize.
This includes the playing of online interactive lottery games. However, the playing of a gaming machine, such as a fruit machine, is not the granting of a right to take part in a lottery.
Granting someone the right to take part in a lottery is exempt from VAT. This exemption covers the sale of lottery tickets to the public. If the lottery is free to enter then there is no exempt supply, but see section 13 for treatment of prizes given in a free lottery.
The value of the exempt supply is the gross proceeds from the ticket sales less only the amount of cash prizes given or the cost, including VAT, of goods given as prizes (but see section 13 if the lottery is free).
The promotion of lotteries is only lawful in those circumstances specifically described in the Gambling Act 2005. In addition to the National Lottery, there are other kinds of public lottery which fall under the regulatory powers of the Gambling Commission and local authorities, as follows:
These lotteries can only be run in support of good causes, such as charity fundraising and cannot be run for commercial purposes. However, there are also three other categories of lottery permitted under the Gambling Act, which do not require operating licences or registration with any statutory body, and do not need to be in support of a good cause:
If the society sets up a separate development association or other organisation to promote its lottery, it will be that association or organisation which is making the exempt supply. The net proceeds of the lottery paid by the development association to the society are outside the scope of VAT and any expense relating to the lottery, where these are deductible, cannot be reclaimed by the society as its input tax.
The National Lottery is regulated by the National Lottery Commission and is the only lottery of its kind that may legally be run in the UK.
Local authorities are allowed to promote lotteries under the Gambling Act. When a local authority promotes or organises a lottery this is treated the same way as those run by societies. Local authorities proposing to run a lottery should contact our Helpline on 0300 200 3700 to discuss the circumstances, with particular regard to the amount of input tax that the authority will be entitled to deduct.
An External Lottery Manager (ELM) is a person or body who makes arrangements for a lottery on behalf of a society or local authority. These arrangements may include such things as arranging for tickets to be printed, organising publicity, arranging for the sale of tickets by agents and the paying out of prizes.
An ELM will not be a member, officer or employee of the society or authority, and will normally be required to obtain a lottery manager's operating licence from the Gambling Commission in order to carry on lottery management activities.
The supply of lottery management services is standard-rated. A provider of such services must account for VAT on the following:
However, if a lottery management company also sells tickets itself by using its own outlets and employees, rather than merely arranging for their sale by independent sellers, it will be entitled to exempt this direct selling service like any other ticket seller. If the company does not specify a separate charge for its own selling service, it must make an apportionment of its global charge as between the exempt and standard-rated services provided to the promoter. The exempt element of the charge must be shown separately on the tax invoice.
The actual service of selling lottery tickets is exempt.
No. If a retailer sells lottery tickets as an agent for either a lottery management company or promoter, the commission that they receive is a consideration for the exempt service of selling lottery tickets to the public.
The principal must account for the value of ticket sales to the public, and the principal is usually the lottery promoter. However, if the tickets are sold to a retailer who will sell the tickets on at a higher price, that retailer becomes the principal. The purchase of the tickets by the retailer from the promoter would be exempt. The money retained from sales of the tickets by the retailer is exempt.
If a ticket seller uses one of the retail schemes to account for VAT, the exempt outputs must not be included in the scheme calculations. Therefore money taken for the sale of tickets should be excluded as this is not part of the retailer’s taxable turnover.
If the value of lottery tickets sold is included in the Daily Gross Takings (DGT) then, when calculating the DGT for the retail scheme calculation, the retailer should reduce the DGT by the value of the lottery tickets sold. For further information about retail schemes, see VAT Notice 727 Retail schemes.
An electronic lottery terminal will typically hold a group of virtual electronic tickets which have been randomly distributed. As with a paper pull-tab lottery, the order in which the next ticket is revealed cannot be influenced by the player or the machine. The supply made by making the machine available for play is the right to participate in a lottery and it is exempt from VAT.
Participation and session charges are made for the right to take part in a game or series of games of bingo. As of 27 April 2009 all bingo participation fees and session charges became exempt from VAT.
A bingo machine is designed or adapted to play provide an electronic or video version of a game of bingo. The takings from the machine for the games are exempt from VAT.
A machine game is a game whether of skill or chance, or both, played on a machine for a prize. A machine may be termed as a gaming machine or amusement machine.
A relevant machine game is a game of skill or chance or both that is played on a machine for a prize and which is not subject to any duty. Examples of such games include:
From 1 February 2013, a new excise duty, MGD was introduced. Where MGD is chargeable, no VAT is due on the machine game takings as the supplies are exempt
Mixed machine games offer players the opportunity to win cash and non-cash prizes. In some instances, the machines may also offer non-game activities, for example, access to social media websites.
An example of a mixed machine includes a coin pusher machine which rewards players with prizes in the form of cash or a small cuddly toy.
There are a number of different supplies involved in dealings connected with machine games. These are the supply of:
Section 12 describes a number of supply combinations that may be involved when the use of a gaming or amusement machine is supplied to the public. It does not cover all of the possibilities, but you may find the examples helpful if you are trying to determine the nature and liability of the supplies you are making.
In most cases the supply of the use of a machine to play machine games will be exempt from VAT (dutiable machine games). However, where taxable supplies are made (relevant machine games), the person who supplies the use of the machine to the public must account for VAT on the takings. There can only be one person who does this and it will usually be the person who exercises day-to-day control over the machine and is entitled to the takings.
(a) Gaming machines. The person who supplies the use of the gaming machine to the public is usually the occupier of the premises on which the machine is situated. In the case of:
(b) Amusement machines. The person who supplies the use of an amusement machine to the public will be either the:
However, the correct position can only be determined by reference to the particular arrangements in each case.
Taxable takings are regarded as VAT inclusive. No other deductions should be made from the takings before the VAT fraction is applied. Do not deduct from the takings:
In principle, the taxable receipts should be calculated for each individual machine. However, if you operate amusement arcades with large numbers of machines, it may be possible to calculate your receipts upon a site-wide basis. You should obtain approval for this procedure from our VAT Helpline.
The tax point for supplies made from coin-operated machines is the date the machine is used although, as an accounting convenience, operators may delay accounting for VAT until each time that the takings are removed from the machine.
When you work out the takings you must treat a replayable token (one which can be used to play a machine) as having its recognised cash value. For example, if a machine can be played with either a 10p coin or a token, you must take the value of the token as 10p.
Any tokens previously returned to the machine through the ‘no play’ token return slot by the site occupier or gaming machine owner are outside the scope of VAT. These tokens have not been used to play the machine and therefore are not part of the takings.
These tokens cannot be used to play a machine. Their treatment in the takings depends on whether they have a recognised cash value.
Where tokens have no recognised cash value and are exchangeable for goods you do not also sell, record the full amount of cash removed from the machine after any necessary adjustments to the cash float. Do not make any deduction for tokens won or put into the float, or for prizes given in exchange for these tokens.
When takings are removed from machines, you may find that they contain foreign coins, fakes or facsimiles that players have inserted to obtain plays. These may be disregarded. They do not form part of the takings but equally you must not reduce the takings because of them.
If you use one of the retail schemes, you should deal with your taxable 'relevant machine game' takings as follows.
Where your minority goods are standard-rated (and reduced-rated where applicable) exclude the takings from your scheme calculations and keep a separate record, working out the VAT due as explained in paragraph 11.2. You can find further information on Direct Calculation schemes in Notice 727/5 Retail schemes: How to work the Direct Calculation Schemes.
Don’t forget to include the VAT due on your machine takings in the total output tax shown as due on your VAT return.
Where dutiable machine game operator uses one of the retail schemes to account for VAT, the exempt outputs must not be included in the scheme calculations. Therefore the takings from playing these dutiable machine games should be excluded as this is not part of the retailer’s taxable turnover.
If the value of exempt dutiable machine game takings is included in the Daily Gross Takings (DGT), then, when calculating the DGT for the retail scheme calculation, the retailer should reduce the DGT by the value of the exempt dutiable machine game takings. For further information about retail schemes, see VAT Notice 727 Retail schemes.
Yes. The tax point for supplies made from coin-operated machines is the date the machine is used although, as an accounting convenience, operators may delay accounting for VAT until the takings are removed from the machine.
For all other purposes however, the normal tax point rules apply. Therefore in the event of a theft of takings from a machine VAT must still be accounted for in full on any supplies that have been made from the machine.
The following sets out the VAT treatment of prizes awarded in betting and gaming.
You are entitled to deduct the input tax incurred on goods and services that you use or intend to use in making taxable supplies. You cannot normally deduct input tax incurred on costs that relate to your exempt supplies. However, if your input tax relates to both taxable and exempt supplies, you will be ‘partly exempt’. Partly exempt businesses must undertake a calculation each time they complete their VAT return, which works out how much input tax they may recover. For further information about partial exemption, see Notice 706 Partial Exemption.
Your Charter explains what you can expect from us and what we can expect from you. For more information go to Your Charter.
If you have any comments or suggestions to make about this notice, please write to:
HM Revenue & Customs
VAT Liability Team
100 Parliament Street
Please note this address is not for general enquiries.
For your general enquiries please phone our Helpline 0300 200 3700.
If you are unhappy with our service, please contact the person or office you have been dealing with. They will try to put things right. If you are still unhappy, they will tell you how to complain.
HM Revenue & Customs is a Data Controller under the Data Protection Act 1998. We hold information for the purposes specified in our notification to the Information Commissioner, including the assessment and collection of tax and duties, the payment of benefits and the prevention and detection of crime, and may use this information for any of them.
We may get information about you from others, or we may give information to them. If we do, it will only be as the law permits to:
We may check information we receive about you with what is already in our records. This can include information provided by you, as well as by others, such as other government departments or agencies and overseas tax and customs authorities. We will not give information to anyone outside HM Revenue & Customs unless the law permits us to do so. For more information go to hmrc.gov.uk and look for Data Protection Act within the Search facility.
This document is available in the following formats
Please be aware that our PDF, Word, Excel and Powerpoint documents will open in a new window.