Guidance

Machine Games Duty (Excise Notice 452)

Find out about Machine Games Duty, how the duty is charged and who has to pay.

• From: HM Revenue & Customs
• Published: 7 July 2021
• Last updated: 13 December 2021 — See all updates

Overview

This notice explains:

• who has to account for Machine Games Duty
• how you register, including the conditions you must comply with
• what records and accounts you must keep
• how to work out the duty and make returns and payments

Licences and law

Usually, the person who holds a licence or permit for the premises in which a dutiable machine game is provided for play, should register for Machine Games Duty. However, if you’re the tenant of a pub in which machine games are provided, you must register for and pay the duty regardless of who holds the alcohol licence.

In Great Britain, the relevant licences or permits a person can hold include:

• premises licences for gambling activities, granted under the Gambling Act 2005
• family entertainment centre gaming machine permits
• club gaming permits
• club machine permits
• prize gaming permits
• licensing Act (England and Wales) 2003 premises licences, for on-sales of alcohol and the equivalent, granted under the Licensing (Scotland) Act 2005
• club premises certificates, granted under Part 3 of the Licensing Act 2003

In Northern Ireland, the relevant licences or permits a person can hold include:

• registration certificates, including a club registration certificates
• bookmaking office licences
• bingo club licences
• amusement permits
• licences allowing the serving of alcohol (but only if the other licence permits or certificates are not held for the same premises)

For the legal references for these licences and permits, read the Finance Act 2012, Schedule 24, paragraph 22.

The Gambling Act 2005 governs the operation of exempt lotteries and contains separate requirements for operating and premises licences. If you have any queries about this law or your licences, contact the:

• Gambling Commission
• Department for Digital, Culture, Media and Sport

What Machine Games Duty is

Machine Games Duty is a duty of excise charged on playing certain machine games in the UK. Not all machine games are dutiable.

A machine game is a game of chance, skill or both, played on a machine to win a prize. Such games include:

• quizzes
• tests of coordination or manual dexterity
• games played on machines traditionally known as ‘skill with prize’ (SWP) machines
• games installed on machines in particular locations
• games on portable devices, such as a handheld tablets

The game is subject to Machine Games Duty if at least one prize is (or includes) cash to a value greater than the cost to play once.

Prize items, vouchers, tokens and tickets are treated as cash prizes if they can be exchanged for cash (even if they can also be exchanged for something other than cash).

Machine Games Duty is only due in respect of takings from the dutiable machine games if a machine offers several games and some of the games are:

• dutiable machine games (played for a cash prize that exceeds the cost to play once)
• played only for a non-cash prize

If the prize pay-out cannot be what is advertised

If a machine game appears to offer a cash prize exceeding the cost to play, but this prize is not actually available, as long as an adult can reasonably believe it’s possible to win it, the game is treated as a dutiable. The appropriate rate of duty is determined by the cost to play and the size of the cash prize that an adult reasonably believes could be won.

For example: the cost to play a machine game once is 10p and a potential prize pay-out of £50 is clearly advertised. However, the machine has been set-up so it will never pay out more than 5p. On the basis that an adult would reasonably believe it was possible to win £50, the machine game is subject to duty at the standard rate.

Machines that are remotely credited

If the cost to play your machine is not inserted into the machine but is made at a counter, for example, and a member of staff uses it to credit a machine, duty is still due if a possible cash prize is more than the amount paid to play.

If you use remote crediting, you must keep records that establish a link between payments made and credits to play.

Machines with multiple games

If more than one game can be played on a machine, you must consider the liability of each game individually. For example, where a single machine hosts one game that offers a cash prize greater than the cost of the game, and another game that offers no prizes, the first game is subject to the duty, but the second game is not.

Multi-stage games

Where one game is split into stages, it’s still treated as a single dutiable game. It will be liable to the duty if:

• at least one of the stages (if played on its own) would be a dutiable machine game
• the stages (taken together) amount to a single dutiable machine game

Find out the Excise Duty rates for Machine Games Duty.

What Machine Game Duty does not apply to

No duty is payable for machine games used to:

• bet on real events, such as horse or greyhound racing and sports events where General Betting Duty applies
• play bingo where Bingo Duty applies
• take a chance in a lottery where Lottery Duty applies
• play a game of chance, such as a casino game where Gaming Duty applies

The duty is not payable for games that only offer non-cash prizes. If a machine game offers both cash and non-cash prizes, it’s the size of the cash prize that determines if the duty is due.

Example

The cost to play a ‘pusher’ machine (sometimes called a ‘penny falls machine’) is 10 pence.

Inserting the 10 pence may cause one or several 10 pence pieces to fall into the prize hopper. This means there’s a chance to win more than the cost to play, therefore, the machine is liable to Machine Games Duty duty.

The game remains liable even if non-cash prizes (such as key rings) are added, because the possibility of the greater cash prize remains the same.

Prize items, vouchers, tokens and tickets which can be exchanged for cash are treated as cash prizes.

Machine games on a foreign-going ship

Once a ship leaving the UK for a foreign destination (a foreign-going vessel) is cleared to ‘go foreign’, it’s treated as outside the UK. From that point, the machines on board are not liable for Machine Games Duty.

There’s also no liability for machine games on a ship coming to the UK from a foreign destination.

A ship tied up in a UK port is considered to be in the UK, regardless of its intended destination.

Takings from machine games on non- foreign-going vessels remain subject to the duty, unless they’re otherwise exempt.

Example

The ferry ‘Island Air’ is to make a return journey from Kingston upon Hull (UK) to Amsterdam (Netherlands). There are 10 machines on board.

All the machines are turned off while the passengers are being loaded in Hull. When the ship weighs anchor, the machines are turned back on. The machines remain on until, following the return journey from Amsterdam, the anchor is dropped in Hull. At this point the machines are turned off again. No Machine Games Duty is payable in respect of machine game play during the journey.

Exemptions

The takings from machine games are exempt from Machine Games Duty in certain circumstances.

If all the takings from machine games provided for play on particular premises are expected to be exempt, then there is no requirement for anyone to register for Machine Games Duty for those premises.

In all cases except play on a domestic occasion, appropriate records must be kept to demonstrate that takings from machine game-play are exempt.

Charitable events

No duty is payable for machine games played at events:

• promoted by, or for, not-for-profit organisations
• where the net proceeds are not for private gain
• where the main reason for attending is something other than playing machine games

Tournaments

No duty is payable for tournament machine game-play.

A tournament takes place when 2 or more real players compete against each other by playing a machine game for a prize. There may be a fee to enter the tournament.

An event cannot be classified as a tournament if any player :

• is not real (for example, if there’s a virtual player or the possibility of the machine winning)
• is a registrable person for the premises where the game is played
• represents, or is employed by, a registered person for the premises where the game is played
• is directed by a registered person for the premises where the game is played, or their representative or employee

An event cannot be classified a tournament solely based on the fact a machine is a:

• compensated machine operating pay-out management where winnings may be affected by an earlier win on the same machine
• community machine (also known as a ‘linked machine’) – a line of similar machines physically joined by a display panel (sometimes described as a ‘top box’) but that operate independently (players are not playing against each other)
• lottery machine

Lottery machines

No duty is payable for machines regulated as Category B3A gaming machines (provided they’re operated legally). B3A machines (also known as ‘lottery machines’) are only permitted in certain clubs. Find more information on the Gambling Commission website.

Machines on which lotteries are played, that are not regulated as Category B3A gaming machines, are not exempt from the duty.

Automatic lottery ticket vending machines (also known as ‘pull tab lottery machines’) are unlikely to be liable to Machine Games Duty. They are not usually classified as games played on a machine. However, where these machines are available in such a way that it offers game-play, then duty may be due.

‘Prize every time’ and vending machines

Duty is not payable unless the machine is set up for game-play, with the possibility of winning at least one prize consisting of (or including) cash with a value of more than the cost to play the game once.

Ordinary vending machines are unlikely to be liable for duty because there’s no game involved.

‘Prize every time’ machines are unlikely to be liable for duty because all possible prizes can be expected to be non-cash prizes. However, a liability would exist where, for example, the amount paid to play was 50p and the prize every time was either a keyring worth 5 pence or a £1 coin.

Domestic use

No duty is payable for profits from play on a domestic occasion.

Play in the home is normally considered to be a domestic occasion. This includes games played on personal laptops and smart phones, which may still be considered domestic use, even when played outside of the home.

Crown exemption

In some cases, where the Crown is seen to be responsible for premises where machine games are provided for play (such as on military bases), Crown exemption applies.

However, Crown exemption does not apply simply by virtue of the fact that the Crown owns the premises.

Examples

1. The Base commander of a military base arranges for a gaming machine to be placed in a mess on site. Crown exemption applies.

2. Machine games are located in a privately run bowling alley, in the vicinity of a military base. Although the building is owned by the Crown, the Crown has no involvement in the running of the bowling alley. Therefore, Crown exemption does not apply.

Registration

You must register for Machine Games Duty at least 14 days before you make your machines available to play. You do not need to register if someone else is registered for all of the premises for which you are responsible. You can check the Machine Games Duty register.

Machine Games Duty registration is required for all premises from which machine games with dutiable, non-exempt takings are provided for play. An application for registration may cover more than one premise. If there are multiple premises covered by one relevant licence or permit, you:

• only need to tell HMRC the address of your principal place of business
• must declare that the licence or permit covers more than one premises

If your premises is not covered by any relevant licence or permit, you must still give HMRC the address if dutiable machine games are or will be provided for play there.

You must register for Machine Games Duty before machine games are made available for play. It’s possible to apply for registration up to 3 months before it is expected that machine games will be made available for play.

A straightforward case can normally be processed within 14 days, however this may take longer if additional checks are needed, such as if a security is needed before registration can be completed. Regulation 11 of the Machine Games Duty Regulations 2012 provides that, if HMRC believe you might not pay, registration can be refused unless you provide security.

HMRC will not process incomplete applications. If an incomplete application is received, HMRC will contact you for the missing information. This may also mean that your application takes longer to process.

When your registration has been processed, you’ll be given a reference number which you should quote whenever you contact us about Machine Games Duty.

You could be liable to a penalty if you provide machine games for play before a registration is fully processed and details have been entered on the Machine Games Duty register.

Who needs to register

The person who holds the relevant licence or permit for the premises is usually the person who needs to register for, and pay, the duty. If no one is registered, other involved parties may be liable to pay the duty. You can check who is registered on the Machine Games Duty register.

Tenants

If you’re the tenant of a pub in which machine games are provided, you must register whether you hold the alcohol licence or not.

When a tenanted pub changes hands and a new tenant takes over the running of the pub, the original tenant is no longer liable for the duty. The original tenant must deregister and the new tenant must make a new registration and pay the duty in their place.

Machine Suppliers

Suppliers of dutiable gaming machines are not liable for the duty. They do not need to register unless they also hold a relevant licence or permit for premises where the dutiable machine games are provided for play. This applies when the role of the machine supplier does not extend beyond:

• the ownership of the machines
• providing machines for play
• being entitled to a share in the takings from the machines

The person who registers is the person responsible for the premises where the machines are based.

If no one holds a relevant licence or permit

The person who must register (the registrable person) is someone:

• required to hold a relevant licence or permit, but does not
• who owns, occupies or leases the premises (or is responsible to that person for the management of the premises)
• responsible for:
  • controlling the use of the machines on the premises
  • controlling admission to the premises
  • providing customers on the premises with goods and services

If no one registers, all of these people are liable to pay the duty due. HMRC will only collect the duty once.

How to register

HMRC advises you to apply through the HMRC Online Service because:

• it helps you complete the application correctly
• the information is tailored to you
• it makes it quicker and easier for you to apply

To use the HMRC Online Service, you need a Government Gateway user ID and password. In most cases, when you make an account, you’ll be automatically be enrolled for associated online services.

When your ID and password are set up, a unique ID number will be displayed on screen. You need to use this ID number and your password to log in to the service. For security reasons, HMRC will not display this unique ID number again or confirm it in writing.

The following two sections have the force of law under regulations 4 and 6 of the Machine Games Duty Regulations 2012.

HMRC Online Service (prescribed electronic method)

To register online:

1. Go to the GOV.UK website and access the HMRC Online Service.

2. Set up a Government Gateway user ID and password by following all prompts.

3. Complete the application in full through HMRC Online Services and follow all prompts.

Paper registration applications

To apply using a paper application, you must:

1. Download a copy of the form MGD1: Machine Games Duty application or phone the HMRC Excise helpline for a copy.

2. When you’ve completed the form, send it by post to the Gambling Duties Team.

Applications sent to any other address may not be accepted.

Compulsory registration

If a premises appears to have dutiable machine games available for play, but there’s no one registered at that premises, HMRC can compulsorily register someone who is deemed to be a registrable person.

We’ll issue a registration notice before registering someone in this way. The notice will list all premises for which compulsory registration is being considered.

You have 30 days from the date of the notice to appeal against HMRC’s decision that:

• you’re a registrable person for the premises
• dutiable machine games are available for play at the premises

All appeals must be made in writing. A registration notice can cover more than one premises. You may appeal against compulsory registration for some or all of the premises listed on the notice. If you only appeal in respect of some of the premises, then compulsory registration may proceed for the premises not subject to appeal.

If no appeals are made (or an appeal is denied), compulsory registration will be made from the date the registration notice is issued, unless someone registers during 30 day appeal period.

Machine games at a travelling fair

For machine games at a travelling fair, the person who must register is either the:

• holder of the stall
• person in charge of the fair

If no one registers, both are liable to pay the duty due. HMRC will only collect the duty once.

Report changes

You must tell HMRC about any changes to, or inaccuracies in, the information supplied on your application for registration as soon as you become aware of them (this is a requirement of Regulation 6(4) of the Machine Games Duty Regulations 2012).

Where the registration application was made using the HMRC Online Service, you must make the changes through the service too. Where the application was made on paper, you must make the changes by sending the new or correct information, in writing, to the Gambling Duties Team.

If you fail to notify

You could be charged a penalty if:

• you fail to notify us of any changes at the right time
• you provide machine games for play before a registration is fully processed and details have been entered on the Machine Games Duty register

Find out more in Compliance checks: penalties for failure to notify.

The Machine Games Duty register

The Machine Games Duty register is a public list of all Machine Games Duty registrations available online.

Anyone can use the register free of charge to check if someone is registered for the duty. If you have a potential liability for the duty, you should check the register annually. You’re advised to keep records of registration enquires. To do this, print the results of your enquiry using the print facility. The print copy will show the date. You are entitled to rely on the information on the register at the time you make your enquiry.

If you enter a postcode, all registered premises at that postcode will be displayed. If multiple premises are registered under one application (due to them sharing a licence or permit), in most cases, only the principal place of business will be displayed, even though the registration covers all the premises.

If you want to know about registration for premises that are not someone’s principal place of business, you’ll need to know their principal place of business and their full name or company name.

If your registration application is accepted, HMRC will add your name to the register. The date on which HMRC do this will be the date of registration. Registrations cannot be backdated.

Once you’re on the register, HMRC will send you a Machine Games Duty certificate of registration. This will give you your unique reference number which will appear on your returns and other Machine Games Duty documentation. You should use this reference number any time you contact us about Machine Games Duty. You do not have to display your certificate.

HMRC can update your registration details (providing we have the relevant information), if we believe:

• your registration details are incorrect
• you’ve ceased to be a registrable person
• you’ve joined a group or partnership

This may include removing your name from the register without being asked to do so.

We’ll write to you within 7 business days of any change, explaining why it has happened. If you think it has been done in error, contact the Gambling Duties team.

Alternatively, we may ask you to send the correct information. In this case, we will make the changes to the register and tell you within 7 business days. You must provide the information requested within 30 days from the date of HMRC’s request.

You may be required to submit a new application for registration. If that application is accepted, we may register you again under a new Machine Games Duty registration number. We’ll cancel the current registration from the time the new one starts.

How to deregister

You can cancel your registration if you cease to be a registrable person because you:

• cease trading
• no longer provide dutiable machine games for play
• are no longer the tenant of premises where dutiable machine games are provided for play
• wish to join a group or a partnership

If you stop trading, contact the Gambling Duties Team as soon as you know your last day of trading.

You may notify HMRC up to 3 months before your chosen date of deregistration takes effect. If you are a seasonal trader you do not need to deregister at the end of each season. However, you must still submit nil returns for the periods when you are not operating.

The following rules have the force of law under Regulation 8 of The Machine Games Duty Regulations 2012.

When you cancel your registration you must confirm:

• you’re registered for Machine Game Duty (giving your registration number)
• you’re not (or will not at the time of deregistration) be a registrable person in respect of the premises concerned, or you wish to join a group or partnership
• the date from which deregistration should take effect

On receipt of your correct and complete deregistration notice (either an electronic notification or a notice submitted in writing), HMRC will remove your name from the register within 14 days of the date specified in your notification. HMRC will write to you to confirm your deregistration.

HMRC will issue a return for any whole or part accounting period immediately prior to deregistration, for which a return has not been received. This return must be completed and any duty liability paid.

Group registration

This is an arrangement for simplifying duty accounting administration. There must be at least 2 prospective members of any group. One member must agree to be the Group Representative Member. All group members are jointly and severally liable for the Machine Games Duty due.

Group registration may be allowed if all of the proposed members:

• are corporate bodies
• are registrable persons in their own right
• have the same common controller
• are resident (or have an established place of business) in the UK
• have agreed to be part of the group

Any security requested must be paid before your registration is accepted.

HMRC may refuse a group registration application if it appears necessary for the protection of revenue.

Applying for group treatment

The Group Representative Member should apply for group treatment.

HMRC must receive your application at least 90 days before you want to be treated as a group (although we may agree to a shorter period). Your group registration cannot be granted until your application form has been received.

Include on your application the:

• date you want us to treat you as a group
• name of the representative member of the group

The representative member is responsible for:

• completing and submitting returns
• telling us about any changes to the registration details or premises within 7 working days of becoming aware of a change or any inaccuracy

Confirmation must be provided that all group members agree to the changes being made or that the information being provided corrects an inaccuracy.

The benefits of group treatment

You’ll have a single registration that covers all the members and notified premises within the group. This means that only one duty return and payment is needed for each full accounting period. Therefore, each single return will cover the Machine Games Duty liability for all the members within the group. This avoids each company or each set of premises needing to complete individual returns.

The accounting period

An accounting period is a set period of time over which Machine Games Duty due must be calculated. After the end of each accounting period a return must be submitted and, unless the return shows that no duty is due, Machine Games Duty must be paid. An accounting period may also be referred to as a ‘return period’.

A standard accounting period is 3 whole calendar months, ending on the last day of the third month. There are 3 separate accounting period ‘staggers’ each year, as follows:

• Stagger A, ending 31 January, 30 April, 31 July and 31 October
• Stagger B, ending 28(29) February, 31 May, 31 August and 30 November
• Stagger C, ending 31 March, 30 June, 30 September and 31 December

If you want to apply for a preferred stagger period or adopt non-standard accounting periods, you can do so electronically when you register online (you’ll be invited to select a stagger period), or you can write to the Gambling Duties Team at least 28 days before the first period starts.

Non-standard accounting periods must:

• be broadly 3 months
• have the flexibility to move the start or end dates of each period, up to 16 days forwards or backwards, from what would have been the normal start or end date

In practice, this means you can arrange accounting periods so that each ends on a day that suits you.

You may, for example, prefer a stagger which results in 1 period ending on the day of your financial year-end. This may reduce the number of accounting adjustments you need to make when you prepare your year-end accounts.

If you apply for non-standard accounting periods, you will need to give HMRC the end dates of each accounting period for a 2-year period.

If you wish to continue with non-standard periods after the end of the 2-year period, you should (during the penultimate accounting period), give HMRC the end dates of the further non-standard periods in respect of the following 2 years.

If we cannot agree to your proposed alternative accounting periods, you’ll need to operate the normal accounting periods. Under the Finance Act 1994, you can appeal against our decision.

Examples of stagger periods

Stagger A: an accounting period ends on 31 January. The next accounting periods starts on 1 February and runs through to 30 April.

Stagger B: an accounting period ends on 28(29) February. The next accounting period starts on 1 March and runs through to 31 May.

If your registration starts after the first of the month, the first accounting period will cover 1 part month, plus the following 1, 2 or 3 full months (depending on the stagger). For example, if a registration starts on 21 May, the first accounting period will end on 30 June, 31 July or 31 August (depending on the stagger).

Returns and duty payment

A duty return is a declaration which must be completed to tell HMRC how much Machine Games Duty is due in each accounting period.

The registered person must submit a return after each accounting period, even if they’ve not carried out business during that period and do not have any net takings. If your business has had to close for any reason, you still need to submit your quarterly return as a nil return.

HMRC must receive your return by the 30th day following the end of every accounting period. If the 30th is not a business day, you must send both the return and payment by the last business day before that day.

Failure to send in your return will result in an assessment being made of the duty you owe. This assessment is not a replacement for the missing return. You’ll still need to submit the return showing the relevant figures and duty due for the period in question along with payment of that duty amount.

If you do not follow the rules when making returns and payments, you may receive civil penalties. We may charge a penalty if you fail to take reasonable steps, within 30 days of the date of an assessment, to tell us that it is an under-assessment of your liability.

Read the law on Machine Games Duty.

How to submit a return

HMRC advises you to use the HMRC Online Service because:

• it gives you access to online help
• your return cannot get lost in the post
• you can keep track of your Machine Game Duty affairs by accessing details of previously submitted returns and payments

To use the service for submitting a return, you must first register through the service.

You may submit a paper return if you registered:

• by means of a paper form
• through the HMRC Online Service, but did not sign-up (enrol) to submit returns electronically

A paper return will be issued after the end of each accounting period. If you lose your paper return or do not receive it, phone the HMRC Excise Helpline to get a copy.

HMRC will not accept that you did not receive a blank paper return as an excuse for failing to submit a completed return on time.

The following rules have the force of law under Regulations 4(3) and 12(2) of the Machine Games Duty Regulations 2012

If you choose to use the HMRC Online Service, you must first have registered for Machine Games Duty using the service too.

If you choose to do a paper return, you must use form MGD6: Machine Games Duty Return. You must include your full business details and Machine Games Duty Registration number (where not already included) and then send the completed form by post to:

HMRC
Direct
BX5 5BD

The following requirement has the force of law under Regulation 17(3) of the Machine Games Duty Regulations 2012.

To withdraw consent for the Commissioners to communicate electronically, the registered person must go into their online account on the HMRC Online Service and remove their email address from their contact details.

Correct a mistake on your return

HMRC can charge a penalty if either:

• your return or other tax document is inaccurate and as a result you do not pay enough duty
• you do not tell us a duty assessment we have sent to you is too low

Find more information about inaccuracy penalties and how to appeal.

If you’ve not yet completed your return for the period in which you made the error, you can correct the error by amending your records. Keep a clear note to show the reason for the error and include the correct Machine Games Duty figure in your records for the same period. The correct figure will then work its way through to your Machine Games Duty return as normal.

If you’ve already sent us your return you will need to correct the error by following one of the methods shown below.

Underpayment of duty

If an error meant that you did not pay enough duty on a previous return, you must correct that error in one of the following ways:

• write to the Gambling Duties Team about the error either:
  • for errors of any size (your letter should detail the amount of the errors and the circumstances, in which it came about)
  • subject to conditions
• enter the amount of the under-declaration in box 9 on your next Machine Games Duty return – you can only use box 9 if:
  • the overall amount does not exceed £10,000 (net value)
  • the overall amount does not exceed £50,000 (net value) and will not be more than 1% of the total net takings from dutiable machine games in the accounting period during which the error was discovered
  • you have no reason to believe the error was because you did not take reasonable care

HMRC will carry out checks where box 9 on the return is used. HMRC may contact you to find out when and how the error happened.

Make sure you keep sufficient documentation to give a satisfactory audit trail. We may ask you to explain any adjustment.

As soon as you find an error, you should make a note in your records and record the correct position, or you could become liable to a penalty. You may find it useful to keep a separate error record in your Machine Games Duty account (that is, keeping separate details of any errors discovered). An error record should:

• show the date the error was discovered
• show the accounting period in which the error occurred
• identify any related documentation

At the end of your current Machine Games Duty accounting period, an error record will help you decide if you should write to the Gambling Duties Team or fill in box 9 to correct errors. You should normally wait until the end of the current accounting period before deciding what to do. However, if an individual error is so large that it will inevitably be outside the limits for box 9, you should make an error correction report in writing as soon as possible.

If you deliberately submit a return showing incorrect information, HMRC will treat this seriously. You should tell us immediately about incorrect information you deliberately submitted.

If HMRC find under-declarations of Machine Games Duty on your returns, we’ll assess for the duty due and may charge interest. You may also be liable to a penalty.

The following rules have force of law under Regulation 14(2) of the Machine Games Duty Regulations 2012.

a) Correction of errors

The ‘understatement’ refers to under-declared duty in any previous Machine Games Duty returns. Where the errors comply with all conditions described in Regulation 14(1), you may include the total under-declared duty in box 9 on your next Machine Games Duty return.

(b) Errors in excess of conditions

Write to the Gambling Duties Team

Overdeclarations of duty

The following sentences have the force of law in Regulation 9 of the Revenue Traders (Accounts and Records) Regulations 1992.

If you’ve paid too much duty, you need to make a claim in writing to:

HM Revenue and Customs
Machine Games Duty Team Room E1.03
St Mungo's Road
Cumbernauld
Glasgow
G70 5WY

The claim must be on headed paper and include:

• details of the account you would like the funds paid into, including the:
  • account holder’s name
  • account number
  • account sort code
  • bank or building society name
• your Machine Games Duty registration number
• the amount you want to claim
• the name of registered trader
• the name of person making the claim
• a contact telephone number

You should keep all documentary evidence to support a claim, including documents showing how and when the error arose.

Repayment interest accrues where appropriate and is calculated on a simple (not compound) basis. This means that interest is only calculated on the amount of the tax or penalty (late payment interest only) and not on interest that has already been charged or accrued.

Find more information in Excise Notice 212: statutory interest and repayment of overpaid Excise Duty.

If you’ve paid too much duty

If you pay too much duty by mistake, which does not match with the figures on your return, you can resolve this by reducing your next duty payment by the overpaid amount. This will balance your Machine Games Duty account with HMRC. However, you must not adjust your next return which accompanies this reduced payment, as this will create further problems.

The only times you should make an adjustment on your actual returns are when you’re accounting for:

• a loss which you have made during the accounting period
• an amount of tax which you’ve under-declared on a previous return

There are 2 specific boxes on the return for these 2 possible events, although we would not generally expect to see losses with Machine Games Duty.

Potential penalty liability

We will not charge a penalty if you took reasonable care to get things right, but your return was still wrong. You can prove that you took reasonable care by:

• keeping accurate records so that you can complete your tax returns accurately
• checking with a tax adviser or HMRC if you’re not sure about anything

We may charge you a penalty if you send us a return or other document that contains an inaccuracy that:

• results in tax being unpaid, understated or over-claimed
• was careless, deliberate or deliberate and concealed

If you ask someone else, such as an employee or adviser, to do something on your behalf, you must make sure an inaccuracy does not occur. If you do not do this, we may charge you a penalty.

If you tell us about an inaccuracy before you have any reason to believe we’re about to find it, we call this an ‘unprompted disclosure’. If you tell us about an inaccuracy at any other time, we call it a ‘prompted disclosure’. The minimum penalty for an unprompted disclosure is lower than the minimum penalty for a prompted one.

If you send us a return or document that you believe is correct and you later find it contains a careless inaccuracy, we may be able to reduce the penalty to nil if you make an unprompted disclosure.

If you discover a non-careless error, HMRC expects you to take steps to correct it. If not, the inaccuracy will be treated as careless and a penalty may be charged. In order for HMRC to consider any reduction to a penalty, you must write to the Gambling Duties Team and tell us if you’ve made a careless error or deliberate inaccuracy, regardless of its size or value.

Correcting errors using box 9 of the return is not a disclosure for the purposes of the rules of penalties. If you consider that the error corrected using box 9 was a result of careless behaviour, you’ll not be able to gain the maximum reduction of the penalty unless you also notify us separately in writing. You should set out what the error is and your grounds for seeking a reduction to the penalty. This will be an unprompted or prompted disclosure depending on the circumstances.

The majority of such errors will not be careless or deliberate, so no penalty will be due. When considering whether an error was careless, we’ll establish if you’ve taken the care and attention that could be expected from a reasonable person taking reasonable care in similar circumstances.

Avoiding penalties

You can avoid a financial penalty by checking that you’ve given complete and accurate information on your return. If you’re aware you’ve made a mistake on your return, tell us as soon as possible. We’ll be able to reduce the penalty, in many cases to zero. You must also make sure that returns are received by HMRC and payments are cleared by the due dates.

You have the right to appeal if we impose such a penalty.

For further information on penalties, read the Compliance checks factsheets: penalties.

Who pays the duty

The person who is registered for the duty is liable to pay the duty. No one else can be liable to pay duty as long as someone is registered for each premise that provides dutiable, non-exempt machines. This applies even if the registered person fails to meet their payment obligations.

If takings are made from dutiable machine games on premises where no relevant licence or permit is held (and for where no one has registered for Machine Games Duty), you’re liable to pay the duty if you’re one of the people who needs to register.

If no one is registered and HMRC cannot identify a person who should be registered, profit sharers may be liable to pay the duty due on their share of the profits.

If you have a potential liability for Machine Games Duty, you should make an annual check of whether the person who’s supposed to be registered, is actually registered on the Machine Games Duty register.

If it’s found that someone has registered for the duty, but then deregistered when they should not have done, HMRC may decide that it’s not appropriate to request payment from another liable person, where that person:

• can prove they checked the register within the last 12 months to see someone was registered at the time
• had no reason to think that the person who was registered had since deregistered (such as a change in the course of the year that suggested a change in the registration status, that they should have reasonably been aware of)

In the case of a group registration, the Group Representative Member is expected to pay duty due. However, all group members are jointly and severally liable for payment.

Profit sharers

In certain circumstances, someone who’s not responsible for premises where machine games are provided for play, but who shares in the profits from machine game-play, may be liable to the duty. This may happen if:

• no one is registered for the premises where the machine games are available for play
• HMRC cannot identify anyone responsible for the premises
• HMRC can identify someone responsible for the premises, but they are not in the UK

HMRC will issue a notice to the profit sharer, giving them 30 days (or another agreed period of time) to either:

• provide HMRC with information to identify the person responsible for the premises
• demonstrate that when they became a profit sharer, they took all reasonable steps to make sure the person responsible for the premises was on the Machine Games Duty Register

If the profit sharer cannot satisfy these points within the time limit, we may assess the profit sharer for Machine Games Duty on their share of the profits from machine game-play, going back up to 4 years.

HMRC will not refund any duty paid by the profit sharer, even if the person responsible for the premises is subsequently identified. We will not collect any amount paid by the profit sharer from the person responsible for the premises.

How to pay

The following rules have the force of law under Regulations 13(2)(a) and 13(3)(b) of the Machine Games Duty Regulations 2012.

The commissioners prescribe that payment may be made electronically.

The Registered Person must pay what is due. If you’re not registered but are liable to pay an amount of duty, HMRC will send you details explaining how to pay.

HMRC accepts payment by a range of methods, but recommends you use either:

• online bank account payments
• BACS direct credit
• internet or phone banking
• CHAPS
• Faster Payments

For CHAPS, you’ll need to supply your bank or building society with the following details:

• sort code: 08-32-00
• account number: 12000911
• account name: HMRC GACA
• payment amount
• your Machine Games Duty reference number

Direct Debit payment plans for the payment of Machine Games Duty can be used to pay amounts up to a maximum of £20 million and can only be set up online. You’ll need:

• your Machine Games Duty registration number
• your bank sort code
• the account holder(s) name and account number
• the bank name and address

In the case of a payment by Direct Debit, the Commissioners will begin the collection process on the ‘due date (which is the 30th day after the end of each accounting period or the last business day immediately before this date).

The Commissioners prescribe that a Direct Debit payment will be considered to be collected on the date that the collection process is started, provided that the Direct Debit is not then rejected (in which case payment will be treated as not having been made).

If you’re unable to pay using these options, you should send a cheque with your duty return to HMRC by post. Cheques should be made payable to ‘HM Revenue and Customs only’, followed by your Machine Games Duty reference number.

Send your payment to:

HM Revenue and Customs
Direct
BX5 5BD
United Kingdom

Payment can also be made at a bank.

Whatever payment method you use, you must make sure you’ve enough funds in your account to satisfy payment.

If you’re not registered for Machine Games Duty but are liable to pay an amount of duty, HMRC will send you details explaining how to pay.

Find more information on paying Machine Games Duty.

If you do not pay what is due

If you fail to pay any duty due (full or in part), HMRC may order civil proceedings for recovery of the debt. Read the law on Machine Games Duty.

In serious cases, we may ask the Gambling Commission to review your operating or premises licences.

If no one is registered to pay the duty and HMRC cannot identify a person who should be registered, we have powers to recover unpaid amounts from anyone who shares in the profits from machine game-play.

Interest

Late payment interest accrues if you’re late in paying what you owe. Late payment interest is worked out on the outstanding duty, from the date the amount became due and payable, to the date the amount is actually paid.

Late payment interest is worked out on a simple (not compound) basis. This means that interest is only worked out on the amount of the tax or penalty (late payment interest only), and not on interest that has already been charged or accrued.

Security

Regulation 11 of the Machine Games Duty Regulations 2012 provides that, if HMRC believe you might not pay, registration can be refused unless you provide security.

Even after you’ve registered, if HMRC believe you may not pay the duty you owe, you may be required to provide security as a condition of remaining on the Machine Games Duty Register. If you do not provide this security, your registration may be cancelled.

HMRC may require you to provide security if:

• you’ve failed to comply with your obligations to HMRC in your previous or current business
• your business is run by disqualified directors or by undischarged bankrupts
• you have previously been prosecuted or penalised for a tax-related offence
• other persons concerned with the business registered for Machine Games Duty are connected with past failures to pay any tax due (Machine Games Duty or otherwise)

This list is not exhaustive.

HMRC will tell you that security is required by issuing a Notice of Requirement of Security.

HMRC will always try to give you reasonable time to provide the security before your registration is refused or cancelled. However, HMRC may only give you a limited amount of time if immediate steps are required to prevent a serious risk to revenue.

HMRC will review this security requirement every 2 years. If HMRC consider that there is no longer a risk to the revenue, then the security will be returned.

HMRC calculate the amount of security using the most accurate information available at the time. This information may include tax declared on Machine Games Duty Returns from:

• your current business
• your previous businesses
• businesses of a similar size, with similar customers, in the same trade class

HMRC may add outstanding tax from your current Machine Games Duty registered business to work out the duty owed, before issuing a Notice of Requirement of Security, in respect of that business.

Generally, the amount of security required will be based on an estimation of the amount of Machine Games Duty you would owe over 6 months.

HMRC will normally accept security in the following forms:

• cash or banker’s draft
• a performance bond from an approved financial institution, which is payable on demand

A performance bond must be signed and witnessed by an authorised person, on behalf of the financial institution, and an officer of HMRC.

If you do not provide the security by the time specified in the Notice of Requirement of Security, HMRC will not register you for Machine Games Duty. If you’re already registered, HMRC will cancel your registration (but you will still owe any duty due).

Under the law, you cannot provide dutiable machine games for play on premises, unless those premises are subject to a Machine Games Duty registration (unless it’s expected that all the takings will be exempt from Machine Games Duty).

The maximum penalty is 100% of the revenue lost to HMRC as a result of the failure to register. Machines can also be seized and forfeited.

If you fall behind with payment of Machine Games Duty, HMRC may offset any security you have provided against the duty you owe. We’ll write to you to let you know of any such offset and may ask you to provide a further amount of security. If you do not provide the further security required, we may cancel your registration.

How to work out what Machine Games Duty is due

Types of machines

There are 3 types of machines on which dutiable machine games can be played. Each type is liable to its own rate of duty. These are the:

• lower rate of 5% for Type 1 machines
• standard rate of 20% for Type 2 machines
• higher rate of 25% for Type 3 machines

To qualify as a Type 1 machine, the:

• cost to play every dutiable game on the machine once is no more than 20p
• maximum cash prize for every dutiable game on the machine is no more than £10

These are referred to as the Type 1 limits.

To qualify as a Type 2 machine, the:

• machine must not be classified as a Type 1 machine
• cost to play every dutiable game on the machine once is no more than £5

These are referred to as the Type 2 limits.

Type 3 machines are machines that do not qualify for Type 1 or Type 2.

Machine Games Duty is charged on the total net takings from dutiable machine games in an accounting period from each machine type.

‘Net takings’ are the takings due for machine game-play less the payouts as winnings. For each accounting period, the total net takings for each type of machine is the sum of the net takings from all machines of that type.

How to work out the duty in an accounting period

1. Establish which machines are Type 1, Type 2 and Type 3 machines.

2. Work out the charges to play for each machine type.

3. Work out the value of prizes paid out from each machine type.

4. For each machine types, deduct the value of the prizes from the charges to play – the result is the net takings for each machine type.

5. Apply the Machine Games Duty rate for each machine type to the net takings – the result is the amount payable in duty for each machine type.

6. Add together the amount of Machine Games Duty payable for each machine type.

7. Take into account any under-declarations notified on your previous return (note them in box 9), or any losses from the previous accounting period.

The only deductions you may make are for the value of prizes. You may not deduct amounts for any other costs you have incurred in providing the machine for play.

Net takings do not include any float, as long as the float is not an amount paid for machine game-play. A float should not be included when working out the duty owed when a machine is cashed up. You must keep records that prove the takings not included are genuinely floats.

Example

You have one Type 1 machine and one Type 2 machine. The charge to play the Type 1 machine totals £200 for that period, and the charge to play the Type 2 machine totals £500.

The value of the prizes paid out for the Type 1 machine (for that period) totals £100, and the value of the prizes paid out for the Type 2 machine totals £200.

The net takings are £100 for the Type 1 machine (£200 - £100) and £300 for the Type 2 machine (£500 - £200).

The Machine Games Duty rate for a Type 1 machine is 5%, so the amount payable is £5 (£100 x 5%). The Machine Games Duty rate for a Type 2 machine is 20%, so the amount payable is £60 (£300 x 20%).

The Machine Games Duty due for the period is £65 (£5 + £60).

Find out how to work out what rate of duty applies if the cash prize paid out is not as advertised.

How to value charges to play

The value of charges to play (for example, stakes) is the amount of money paid or owed by players for machine game-play. Charges due for play in an accounting period, which have not actually been paid by the player, must still be included as charges to play for that accounting period.

If the precise value of a charge to play cannot be established (for example, if the charge was in the form of something with a monetary value rather than cash), then the value may be decided using a method which provides a just and reasonable result. It must be possible to demonstrate the method is fair, otherwise further tax may be payable, together with interest and penalties.

If a composite charge is made (a charge for machine game-play and something else), it should be established how much of the charge relates to machine game-play. If it cannot be precisely established how much of the charge relates to each thing, apportionment may be made on a just and reasonable basis. It must be possible to demonstrate that apportionment is on a fair basis, otherwise further tax may be payable, together with interest and penalties.

If you declare a charge as being for made for something other than machine game play, but HMRC believes that part or all of the charge is actually for playing machine games, then, depending on the circumstances, your declarations may be challenged. Further duty may be payable together with interest and penalties.

HMRC may ask for evidence to support how you have established the value of charges to play.

Example

When emptying a machine at the end of an accounting period, you discover it contains 3 fake £10 notes. This £30 is still treated as charges to play and should be included when working out the duty owed. This is because £30 was due for play, even though it was not actually paid. However, £70 was won off one of the fake £10 notes and this £70 can be deducted from the net takings liable to the duty.

How to value prizes

For cash prizes, the value is the amount of cash paid out.

If the sum a player paid to play is refunded to them as part or all of a prize, then that refund is treated as a cash prize paid out.

If a non-cash prize is awarded as a result of play on a machine game liable to duty (because the game also offers at least one cash prize to a value greater than the cost to play the game once), then the value of the non-cash prize may be deducted from dutiable takings subject to the duty.

The value of a non-cash prize is, if bought from:

• an independent third party, the cost actually paid (VAT-inclusive)
• a connected person, the lesser of the price:
  • actually paid
  • that would have been paid had it been bought from an independent third party

The value of non-cash prizes may not be deducted from dutiable takings until the prizes have been awarded. Deduction is not allowed at the point the prizes are purchased. In the case of non-cash prizes awarded through vouchers, deduction is not allowed until the prize itself is handed over (the point at which the voucher is awarded is irrelevant).

If the exact value of non-cash prizes awarded in an accounting period for play on machine games liable to Machine Games Duty cannot be established, then the value may be determined using a method which provides a just and reasonable result. It must be possible to demonstrate that the method used is fair otherwise further tax may be payable, together with interest and penalties

Prize items, vouchers, tokens and tickets

These are treated as cash prizes if they can be exchanged for cash (even if they can also be exchanged for something other than cash). Machine games are not subject to duty if the prize payouts cannot be exchanged for cash.

If they may be exchanged for either cash or non-cash prizes, the value of all prizes paid out (both cash and non-cash) may be offset against the liability for Machine Games Duty. So, where a token, voucher or ticket is exchanged for a non-cash prize, the value of the prize is the value of the item, not the cash value that the token, voucher or ticket could have been exchanged for.

If a voucher purports to have a different value (for example, a cash sum is inscribed on the voucher and this sum is not the value of the non-cash prize awarded) this is of no relevance.

Redemption

Machines may pay out redemption tickets, which go towards the cost of a prize. This is an offering found, typically, in family entertainment centres. The choice of prizes are ‘priced’ with a number of redemption tickets (for example, the prize of a key ring may ‘cost’ 10 tickets).

Machines that only offer redemption tickets as prizes are outside the scope of Machine Games Duty, as long as they cannot be exchanged for cash.

Machine Games Duty is only due if a machine game offers as prizes both non-cash prizes and cash to a value that exceeds the cost to play once.

Examples

1. The cost to play a crane grab is 50 pence. The machine contains as prizes teddy bears some of which have a £5 note pinned to one ear. The machine is a dutiable machine game because there is a cash prize on offer which exceeds the cost of playing the game once.

2. A machine game offers both cash and redemption tickets as prizes, which may be exchanged for non-cash prizes.

The game pays out 1,000 redemption tickets, with a value of 1p shown on each ticket (so this total nominal value is £10).

The tickets are exchanged for a teddy bear with an actual value of £8. The amount to be deducted from dutiable takings for Machine Game Duty purposes is £8.

Machines with multiple games that meet different type limits

The rate of duty is worked out according to a machine as a whole, not to individual games on the machine. If a machine offers a choice of games, a single rate of duty applies to all the games on the machine.

The rate is determined by the game that meets one or both of the following criteria:

• costs the most to play
• offers the largest cash prize

This applies even if no one plays the machine game which costs the most to play or which offers the highest cash prize and only uses the machine to play other games .

Example

A fixed-odds betting terminal offers a mix of games, each with different stakes and prizes. If any of the games cost more than £5 to play, it’s classified as a Type 3 machine. This applies even if the game costing more than £5 is never played.

How to change a duty type during an accounting period

If a machine’s duty type changes during an accounting period, the net takings must be worked out separately, before and after the time of the change.

These workings out must be added to the total net takings in your return, under each relevant machine type, for the whole accounting period.

If exact separate amounts cannot be identified, the net takings must be worked out using a method which provides a just and reasonable result. You must be able to prove the method you’ve used is fair, otherwise you may be liable to pay more tax, interest and penalties.

Example

A machine offers a single game within the Type 2 limits. On 1 May, after close of business, the operator increases the value of the prize, so that the machine is changed to Type 3. The change happens within an accounting period that runs from 1 April to 30 June.

The operator needs to:

1. Work out the takings from the machine from 1 April to 1 May.

2. Enters these on their return as takings from a Type 2 machine.

3. Work out the takings from the machine from 2 May to 30 June.

4. Enter these on their return as takings from a Type 3 machine.

How to split the takings between dutiable games and other content

Generally, machines offering mixed content subject to different taxes (for example, something liable to Machine Games Duty and something else that is not), have the functionality to establish which of the takings come from which games or activities.

If your machine offers mixed content and does not have that functionality, the law allows you to make an estimation using a suitable method. The method you use must produce a just and reasonable result. It must be possible to demonstrate that the method used is fair, otherwise further tax may be payable, together with interest and penalties.

Example

A business has 10 machines which offer mixed content. Only 2 of the machines have the functionality to report the takings from individual games or activities.

There’s nothing about these 2 machines that suggests their takings, or the way they fall into the different games or activities, are different from the other 8 machines.

The business uses the split from these 2 machines as being representative of all the 10 machines.

How to account for foreign currency

Amounts included on an Machine Games Duty return must be in sterling. Any amounts (charges to play or pay-outs) in another currency must be converted into sterling.

The conversion must be carried out on the last day of each accounting period. All transactions in the accounting period, involving a currency other than sterling, must be treated as though they took place on the last day of the accounting period, regardless of when they actually took place.

To make the conversion, use the London closing rate for sterling on the previous day (which should be the day before the last day of your accounting period).

How to carry forward losses

If your workings out for an accounting period provides a negative figure for Machine Games Duty due, you can carry forward this negative amount to the next accounting period.

This is not expected to happen very often but it may happen, for example, when a business installs a new type of machine which pays out a jackpot before that amount has been taken in stakes.

You need to show the negative figure in box 11 on your return for the accounting period in which the negative figure occurred. When you make your next return, you should enter the figure in box 10. This will reduce the duty due in this new accounting period.

You can continue to carry forward any negative duty into later accounting periods until you eventually show positive duty due. HMRC expect that this will only happen in exceptional circumstances.

If you cease trading with a negative duty due, you’re not entitled to any refund or repayment for that amount.

HMRC would expect there to be very few cases of losses in an accounting period. A negative figure for Machine Games Duty due will only occur if winnings paid out exceed the charges to play due. This is not a particularly likely scenario for any machine over a 3 month accounting period. If there is more than 1 machine on the premises (even if 1 machine incurs a loss), it’s extremely unlikely there will be a loss across all machines taken together. Therefore, HMRC will usually expect to see ‘0’ entered in boxes 10 and 11 on the return. HMRC will pay particular attention to returns which involve any amounts other than ‘0’ in boxes 10 or 11.

Example

How to complete your return when your machines have paid out more in winnings than were due in stakes over an accounting period:

Box number on the return	What’s being asked for	Value	Explanation
1	Number of machines available for play at the end of the accounting period	2	Two machines are available for play. (One is liable to the standard rate of duty and one to the lower rate).
2	Total net takings liable to the higher rate of duty	0	There are no machines which are liable to the higher rate, so enter ‘0’ in the box.
3	Total Machine Games Duty due at the higher rate of duty	0	There are no machines liable to the higher rate. Box 2 is nil, so enter ‘0’ in box 3.
4	Total net takings liable to the standard rate of duty	-£1,000	The machine has paid out £1,000 more in winnings than was due in stakes. The takings for the accounting period are minus £1,000. The figure is entered on the return (paper) and a ‘M’ is entered in the adjacent box on the right.
5	Total Machine Games Duty due at the standard rate of duty	-£200	This is box 4 multiplied by 20%. It is a minus figure, so a ‘M’ is entered in the adjacent box on the right.
6	Total net takings liable to the lower rate of duty	£500	The net takings from the machine liable to the lower rate are £500. This machine made a profit and so there is no ‘M’ in the column to the right.
7	Total Machine Games Duty due at the lower rate of duty	£25	This is box 6 multiplied by 5%.
8	Duty payable before any adjustments	-£175	This is box 5 added to boxes 3 and 7. As box 5 is a minus amount, the result is a minus amount, so a ‘M’ is written in the adjacent box on the right.
9	Any under declared duty from previous Machine Games Duty periods	0	No mistakes have been made on previous returns so ‘0’ is recorded in this box.
10	Enter the box 11 amount from your previous return	0	A loss has never been made before, so ‘0’ is recorded in this box.
11	Enter any negative amount of duty that is losses to carry forward	-£175	HMRC will not make a repayment of Machine Games Duty, but will allow businesses in this situation to offset amounts against liability in future accounting periods. The loss of £175 Machine Games Duty is entered in box 11 to carry forward to the next accounting period.
12	Total net duty payable on this return	0	There is no Machine Games Duty to pay on this return.

How to carry forward a negative amount from the previous accounting period:

Box number on the return	What’s being asked for	Value	Explanation
1	Number of machines available for play at the end of the accounting period	2	Two machines are available for play. (One is liable to the standard rate of duty and one to the lower rate).
2	Total net takings liable to the higher rate of duty	0	There are no machines which are liable to the higher rate, so enter ‘0’ in the box.
3	Total Machine Games Duty duty due at the higher rate of duty	0	There are no machines liable to the higher rate. Box 2 is nil, so enter ‘0’ in box 3.
4	Total net takings liable to the standard rate of duty	£1,500	The net takings from the machines liable to the standard rate are £1,500.
5	Total Machine Games Duty due at the standard rate of duty	£300	This is box 4 multiplied by 20%
6	Total net takings liable to the lower rate of duty	£520	The net takings from the machine liable to the lower rate are £520.
7	Total Machine Games Duty due at the lower rate of duty	£26	This is box 6 multiplied by 5%.
8	Duty payable before any adjustments	£326	This is box 5 added to boxes 3 and 7.
9	Any under declared duty from previous Machine Games Duty periods	0	No mistakes have been made on previous returns so ‘0’ is recorded in this box.
10	Enter the box 11 amount from your previous return	£175	–
11	Enter any negative amount of duty that is losses to carry forward	0	–
12	Total net duty payable on this return	£151	Box 8 plus box 9 and adjust for any amount in box 10.

Agents and tax representatives

An agent is a person who has authority and consents to act on behalf of a registered or registrable person. A representative is a UK person assigned to be responsible for the UK Machine Games Duty tax affairs of a registerable person overseas.

You may appoint someone in the UK to manage your Machine Games Duty affairs. This can be an accountant, but does not have to be. If you have an agent, you still remain liable for paying duty and penalties.

Someone wanting to become an agent must register for the Machine Games Duty Agents Service. Once registered, they can seek your authority to act on your behalf online. When HMRC receive an agent request, we send you a letter explaining how to make an authorisation. HMRC cannot discuss your affairs with an agent until they’ve been authorised.

An agent acting on behalf of several people will need to submit an individual return for each client.

Find out more about Tax agent and adviser guidance.

UK representative (or overseas representative)

If you’re liable to Machine Games Duty but are resident outside the UK or EU, you may need to appoint and operate through a UK representative, who will be responsible for all your UK Machine Games Duty tax affairs.

The UK representative must have consented to both act on your behalf and to be jointly and severally liable to all your Machine Games Duty obligations. A UK representative is different from an agent. This is due to them being jointly and severally liable for the duty.

HMRC may require you to both appoint a UK representative and provide a security.

Keeping records

People liable to Machine Games Duty are known as revenue traders. Revenue traders must keep certain records. A profit sharer is deemed as the revenue trader, in respect of premises at which dutiable machine games are provided for play, if a registrable person cannot be identified.

The following sentence has the force of law under Regulation 5(1) of the Revenue Traders (Accounts and Records) Regulations 1992 (SI 1992/3150).

All those registered for Machine Games Duty must keep an Excise Duty Account. This must include all information needed to complete each return and show how the figures on the return have been worked out.

We do not require that you keep your records in any particular way, but they must contain all the relevant information which you have used to complete your returns. You may face penalties if you do not keep adequate records. Keeping good records will help HMRC check them quickly, which will be beneficial for you.

Find out more information about the maintenance and production of accounts and records in Excise Notice 206: Revenue traders’ records or contact the Excise helpline.

The law on record keeping requirements

Under sections 118A and 118B of the Customs and Excise Management Act 1979, HMRC have the legal right to see and take copies of any records, accounts or other documents relating to the business. You must keep your records in a readily accessible format and must produce them to us when asked.

The Revenue Traders (Accounts and Records) Regulations 1992 covers all general record keeping requirements for any revenue trader dealing in financial transactions that are liable to excise duty. Regulation 6 gives us the legal power to include in a notice any additional records you must keep.

Records with the force of law

The following rules have the force of law under regulations 6 and 8 of the Revenue Traders (Accounts and Records) Regulations 1992.

When your machines are in use

You must keep a record of the dates and times your machines are in use and when each machine was:

• brought into use
• taken out of use temporarily
• taken out of use completely

These records must be supported by relevant contracts and invoices.

Changes to your machines

You must keep a record of changes to:

• machine software
• games on a machine
• the percentage level of prize pay-outs

Third party arrangements

You must keep a record of arrangements with third parties to:

• supply machines
• maintain machines
• upgrade machines

Cash in and out of machines

You must keep a record of cash in and cash out of machines in each accounting period. These records must cover activities which may affect the cash balance of a machine, such as:

• floats (including details of ‘top ups’)
• non-cash credits to machines (such as free plays)
• the VAT inclusive amounts paid for prizes (for machines subject to duty which pay out non-cash prizes, including redemption machines)

Other pay-outs to customers

You must record all pay-outs made in respect of machine game-play, that are given by means other than through a machine.

Storage of records, documents and accounts

You must keep:

• trading and profit and loss accounts
• balance sheets
• bank statements
• records used for the purpose of completing Machine Games Duty returns
• any additional records and documents relevant to the business of providing dutiable machine games for play

Where to keep records and for how long

HMRC do not require that you keep your records in any particular way, but they must contain all the relevant information you’ve used to complete your returns.

We recommend you have a clear and robust system for identifying each machine and its location. For example, give each machine an identification number (such as the machine serial number) and a location reference. This will help you to keep track of each machine and its profits.

Records must be kept for 4 years in a readily accessible form and manner.

If you have a problem with record storage, you can write to HMRC and ask for a dispensation to keep some of your records for a period shorter than 4 years.

Books, accounts and returns for a business are usually kept at the principal place of business. However, you can keep these records elsewhere if you wish.

HMRC can require that you make records available for inspection at your principal place of business or registered premises.

HMRC have the legal right to check your duty calculations and take copies of any books, accounts, records or other documents relating to the business.

You may face penalties if you do not keep adequate records.

Keeping records if your liability for duty changes

If you’re only occasionally liable for duty, you’re only required to keep these records during the time that you’re liable. You must keep records from the start of the accounting period in which you’re liable.

The law on Machine Games Duty

The primary law is contained in section 191 and Schedule 24 of the Finance Act 2012. There is also secondary legislation: the Machine Games Duty Regulations 2012 and the Machine Games Duty (Exemptions) Order 2012.

Other legal powers held by HMRC

The power to enter and search your premises

Under the law, HMRC has powers to:

• issue an assessment in the case of under-declarations of duty or returns not being submitted
• enter any premises where machine games are available for play, or where HMRC has reasonable cause to suspect a business has been or is, offering machine games for play – an HMRC officer may remain on the premises so long as there is reasonable cause to suspect that the premises may be used for the purposes of carrying on the business
• require specific records to be kept
• require any person concerned with the management of the premises (or any promoter) to provide information about their machine games provided for play
• inspect business records that HMRC has directed must be kept and any other books, records, accounts or other documents (including business bank accounts and annual accounts)
• take copies of any books, records, accounts or other documents relating to Machine Games Duty

HMRC will normally make an appointment to visit you. However, we may also make unannounced visits.

Seizure of machines

HMRC can seize a machine if we find it on premises and are satisfied that it’s being, has been, or is about to be made available for playing dutiable machine games where:

• no-one has registered in respect of the premises and there’s a serious risk that the duty will not be paid
• duty is due in respect of play on the machine, but has not been paid

A machine seized by HMRC may be forfeit.

Laws that may attract civil penalties

We may apply civil penalties under the following laws:

• Schedule 56 of the Finance Act 2009 (failure to make payments on time)
• Schedule 55 to the Finance Act 2009 (failure to make returns)
• Schedule 24 of the Finance Act 2007 (error in returns)
• Schedule 41 to the Finance Act 2008 (failure to register)

In serious cases, HMRC may ask the Gambling Commission to review your operating licence.

Schedule 24 of the Finance Act 2012 details that it is a criminal offence for a person or a body corporate to knowingly be concerned in the fraudulent evasion of duty. The penalties include imprisonment.

Reviews and appeals

When HMRC gives you a decision, you will be told the reason for the decision and what you need to do if you disagree.

Within 30 days you can:

• send new information or arguments to the officer you’ve been dealing with
• have your case reviewed by a different officer
• have your case heard by an independent tribunal

A different officer from the one who made the decision will handle your review.

If you prefer to have an independent tribunal hear your case, you must write directly to the Tribunals Service. You need to send your appeal to the Tribunals Service within 30 days from the date on the decision letter.

Time limits to ask for a review

You must write to the person who sent you the decision letter within 30 days of the date on the letter. We’ll complete our review within 45 days (unless we agree another time with you).

Unless you go directly to the Tribunal Service before asking for a review, you cannot ask the Tribunal to hear your case until the 45 days (or the time we agreed with you) has expired, or until we’ve told you the outcome.

If you’re not satisfied with the outcome, you have 30 days from the date on the new decision letter to ask the Tribunal to hear your case.

If we cannot complete our review within 45 days (or the time we agreed with you), we’ll ask if you’re willing to agree to an extension. If you do not agree to an extension, the review is treated as one where the decision being reviewed is upheld.

What to include in a request for review

Your request should clearly set out:

• the full details of your case
• the reasons why you disagree with us
• any supporting documentation
• what result you expect from our review

If you do not want a review

You may appeal to the independent Tribunal. You need to send your appeal to the Tribunals Service within 30 days of the date on the decision letter.

More information

Find more information about reviews and appeals in factsheet HMRC1: HM Revenue and Customs decisions - what to do if you disagree.

You may also contact the Excise helpline.

VAT

Machine games that are liable to Machine Games Duty are exempt from VAT. This means that some businesses will become fully exempt for VAT purposes and others will become partly exempt.

This may affect the amount of input tax that a VAT-registered business can claim. In principle, input tax cannot be claimed for purchases that are directly linked to exempt supplies, but it may be claimed where it’s below certain limits.

A business will be partly VAT exempt where it incurs input tax related to both taxable and exempt supplies it makes, or intends to make. A partly VAT exempt business will need to work out the quarterly and annual partial exemptions, so they can justify their input tax claim. The normal VAT partial exemption rules will apply.

Find out more about VAT and betting in Notice 701/29 Betting, gaming and lotteries.

Find out more about the VAT liability of commissions and expenses in Notice 700: the VAT guide.

Examples of duty returns

A tenanted pub

The pub has 2 Category C gaming machines and 1 ‘skill with prize’ machine. The total net takings from all machines are liable to the standard rate of Machine Games Duty. The machines are owned by suppliers.

The income from the machines is split equally between the suppliers and the tenant, after tax. The machines are cashed up every week by the suppliers, and they give the tenant:

• 50% of the takings
• the amount of Machine Games Duty due on all the net takings
• an invoice showing the:
  • takings for the week
  • duty due since the machines were last emptied
  • meter readings for the machine
  • any adjustments to the float

The tenant is responsible for paying the duty and sending a return and payment to HMRC at the right time.

When working out the duty due for the accounting period, they add together the duty shown on all invoices from that period. When an invoice covers a week which spans 2 different accounting periods, they apportion the takings fairly between the 2 accounting periods.

Box number on the return	What’s being asked for	Value	Explanation
1	Number of machines available for play at the end of the accounting period	3	There are three machines. They enter ‘3’ in box 1.
2	Total net takings liable to the higher rate	0	There are no machines which are liable to the higher rate. Box 2 is nil, so they enter ‘0’ in the box.
3	Total Machine Games Duty due at the higher rate of duty	0	There are no machines liable to the higher rate. Box 2 is nil, so they enter ‘0’ in the box 3.
4	Total net takings liable to the standard rate of duty	£1,265.87	They enter the amount of the takings for the accounting period in box 4.
5	Total Machine Games Duty due at the standard rate of duty	£253.17	They multiply the amount in box 4 by 20% (the standard rate of duty). The result is £253.17 (rounded to the nearest penny) which they enter in box 5. They also check this by adding together all the amounts of duty shown on the invoices. The 2 figures are the same.
6	Total net takings liable to the lower rate of duty	0	There are no machines liable to the lower rate, so they enter ‘0’ in the box.
7	Total Machine Games Duty due at the lower rate of duty	0	There are no machines liable to the lower rate. Box 6 is nil, so they enter ‘0’ in box 7.
8	Duty payable before any adjustments	£253.17	This is box 5 added to boxes 3 and 7, but since boxes 3 and 7 are ‘0’ it’s just the amount in box 5.
9	Any under declared duty from previous Machine Games Duty periods	0	If the tenant realises that they’ve made a mistake on an earlier return and they’ve underpaid duty, they can enter the amount here (limits apply). If it is less than £10,000, it can always be entered here. They are not aware of any errors in previous accounting periods, so they enter ‘0’.
10	Enter the box 11 amount from your previous return	0	The machines have never made a loss over a accounting period. They write ‘0’ in this box.
11	Enter any negative amount of duty that is losses to carry forward	0	The machines have never made a loss over a accounting period. They write ‘0’ in this box.
12	Total net duty payable on this return	£253.17	This is the total of box 8 plus anything in box 9. The tenant has nothing in box 9 so they enter the box 8 amount into box 12. This is the duty they must pay for this accounting period.

Sea side amusements

The sea side amusements has 100 machines.

70 machines are redemption machines and only non-cash prizes can be won. This means all the supplies from these machines remain liable to VAT, but can be ignored for the purposes of Machine Games Duty.

20 machines are low stake and prize machines which are liable to the lower rate of Machine Games Duty and 10 machines are liable to the standard rate.

The owner of the amusements cashes up the machines every week. They record the weekly net takings from machines liable to each rate of duty separately.

Box number on the return	What’s being asked for	Value	Explanation
1	Number of machines available for play at the end of the accounting period	30	30 machines are liable to Machine Games Duty.
2	Total net takings liable to the higher rate of duty	0	No machines are liable to the higher rate, so they enter ‘0’ in the box 2
3	Total Machine Games Duty due at the higher rate of duty	0	There are no machines liable to the higher rate. Box 2 is nil, so they enter ‘0’ in box 3.
4	Total net takings liable to the standard rate of duty	£3,150.67	The machines are cashed up every week by the owner or one of the senior staff. Each week’s takings are recorded in a takings record. The owner adds up the net takings for all the times the machines are cashed up in that period. They also adjust for the days either side of when the machines were cashed up at the start and end of the accounting period. The total takings for machines liable to the standard rate are £3,150.67. They enter £3,150.67 in box 4.
5	Total Machine Games Duty due at the standard rate of duty	£630.13	They multiply the amount in box 4 by 20%, (the standard rate of duty). The result is £630.13 (rounded to the nearest penny) which they enter in box 5.
6	Total net takings liable to the lower rate of duty	£5,835.39	The machines are cashed up every week by the owner or one of the senior staff. They do this in the same way and at the same time as the standard rate net takings in box 4. The total net takings for machines liable to the lower rate are £5,835.39. They enter £5,835.39 in box 6.
7	Total Machine Games Duty due at the lower rate of duty	£291.77	They multiply the amount in box 6 by 5%, the lower rate of duty. The result is £291.77 (rounded to the nearest penny) which they enter in box 7.
8	Duty payable before any adjustments	£921.90	This is box 5 added to boxes 3 and 7. The result is £921.90 which they enter in box 8.
9	Any under declared duty from previous Machine Games Duty periods	0	If the owner realises that they’ve made a mistake on an earlier return and they’ve underpaid duty, they can enter the amount here (though limits apply). If it’s less than £10,000 it can always be adjusted here. They are not aware of any errors in previous accounting periods so they enter ‘0’.
10	Enter the box 11 amount from your previous return	0	They write ‘0’ in this box. The machines have never made a loss over a accounting period.
11	Enter any negative amount of duty that is losses to carry forward	0	They write ‘0’ in this box. The machines have never made a loss over a accounting period.
12	Total net duty payable on this return	£921.90	This is the total of box 8 plus anything in box 9. There is no value in box 9, so they enter the amount from box 8 into box 12. This is the duty which the owner must pay for this accounting period.

National chain of bookmakers

The tills in the betting offices and the fixed odds betting terminals are linked by computer to the company’s head office. The head office can see:

• the amount paid to play each game
• the amount of winnings paid out for each game
• the net takings for each machine
• which individual games are the most popular

This information helps the company control the business income and decide which new games will be popular.

The head office keeps records of the daily totals from machines, which show separate takings for every office. These records are analysed for trends.

The company has monthly management accounting periods and these end on the last Sunday of every month. HMRC has granted them special Machine Games Duty accounting periods, which coincide with these dates. This allows them to add together their 3 monthly totals used for management accounting purposes, as the basis of the return. No adjustments (for example, accruals) are needed.

Box number on the return	What’s being asked for	Value	Explanation
1	Number of machines available for play at the end of the accounting period	200	The company has 200 machines which are liable to Machine Game Duty.
2	Total net takings liable to the higher rate of duty	£1,923,134.65	The takings for the accounting period totals £1,923,134.65. These are the exact net takings for the accounting period and no adjustments to the figures are needed.
3	Total Machine Games Duty due at the higher rate of duty	£480,783.65	This is box 2 multiplied by 25% (rounded to the nearest penny)
4	Total net takings liable to the standard rate of duty	0	There are no machines liable to the standard rate, so the company accountant enters ‘0’ in the box.
5	Total Machine Games Duty due at the standard rate of duty	0	There are no machines liable to the standard rate. Box 4 is nil, so the company accountant enters ‘0’ in box 5.
6	Total net takings liable to the lower rate of duty	0	There are no machines liable to the lower rate, so the company accountant enters ‘0’ in the box
7	Total Machine Games Duty due at the lower rate of duty	0	There are no machines liable to the lower rate. Box 6 is nil, so the company accountant enters ‘0’ in box 7.
8	Duty payable before any adjustments	£480,783.65	This is box 3 added to boxes 5 and 7.
9	Any under-declared duty from previous Machine Games Duty periods	£1,905.23	The company accountant discovered that one of the accounting feeds was faulty for some betting offices and six months ago the data for the shops was not reported for one week. The duty due was not declared on the relevant return. The under-declared duty totals £1,905.23 which is added to box 9.
10	Enter the box 11 amount from your previous return	0	The machines never make a loss over a accounting period so they enter ‘0’.
11	Enter any negative amount of duty that is losses to carry forward to the next return	0	The machines never make a loss over a accounting period so they enter ‘0’.
12	Total net duty payable on this return	£482,688.88	This is the total of box 8 plus anything in box 9 and is the amount of duty payable.

More information and support

If you need general help and enquiries, contact the Gambling Duties Team.

If you would like to speak to someone in Welsh, Telephone: 0300 200 3705, Monday to Friday, 8am to 6pm.

All calls are charged at the local rate within the UK. Charges may differ for mobile phones.

Your rights and obligations

Read the HMRC Charter to find out what you can expect from HMRC and what we expect from you.

Help us improve this notice

If you have any feedback about this notice, write to:

Gambling Duties Team
Indirect Taxes
HM Revenue and Customs
Ralli Quays
3 Stanley Street
Salford
M60 9LA

You’ll need to include the full title of this notice. Do not include any personal or financial information like your VAT number.

Putting things right

If you’re unhappy with HMRC’s service, contact the person or office you’ve been dealing with and they’ll try to put things right.

If you’re still unhappy, find out how to complain to HMRC.

How HMRC uses your information

Find out how HMRC uses the information we hold about you.

Published 7 July 2021
Last updated 13 December 2021 + show all updates

1. 13 December 2021

   The section 'How to pay' has been updated, you can now make an online bank account payment.

2. 7 July 2021

   First published.