© Crown copyright 2017
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: firstname.lastname@example.org.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/publications/excise-notice-452-machine-games-duty/excise-notice-452-machine-games-duty
This notice cancels and replaces Notice 452 (March 2017). Details of any changes to the previous version can be found in paragraph 1.2 of this notice.
Certain paragraphs within this notice have the force of law under the:
- Finance Act 2012
- Machine Games Duty Regulations 2012 (S.I. 2012/2500)
- Revenue Traders (Accounts and Records) Regulations 1992 (SI 1992/3150)
Text in this notice which has the force of law is indicated by being placed in a box. See example below.
Example of ‘force of law’ text
Text shown in boxes has the force of law.
1.1 What this notice is about
Machine Games Duty (MGD) is a duty of excise on the takings from certain ‘machine games’. A machine game is a game - whether of chance or skill or both - played on a machine for a prize.
From 1 February 2013, MGD replaces Amusement Machine Licence Duty (AMLD) and VAT currently charged on the income from gaming machines.
This notice explains the MGD regime, how the duty is charged and who is liable to pay. It also explains the transitional arrangements for AMLD.
This notice does not consider VAT in detail. VAT may be due on the takings from machine games where MGD is not due. Some brief guidance on VAT is set out in section 24.
1.2 What’s changed
The option to make payment at the Post Office has been withdrawn.
1.3 Who should read this
- holds, or is required to hold, a licence or permit which allows them to provide gaming machines for play on premises
- owns, leases or rents premises on which machine games may be played
- controls the operation of machines on which machine games may be played
- controls admission to premises on which machine games may be played
- has an interest in premises on which machine games may be located
- is responsible for the management of premises on which machine games may be played
- shares in the profits from machine game-play
2. About the duty
2.1 What is MGD
It is a duty of excise which is charged on playing ‘dutiable machine games’ in the UK. Not all machine games are dutiable.
2.2 What is a dutiable machine game
A machine game is a game played on a machine for a prize. A machine game is ‘dutiable’ (meaning subject to MGD) if at least one of the prizes that can be won is, or includes, cash to a value greater than the cost to play once.
If it is reasonable for an adult to assume that a machine game offers a cash prize worth more than the cost to play, but it is not actually possible to win such a prize, the machine game is dutiable.
If more than one game can be played on a machine there must be a separate consideration of whether or not each game is a dutiable machine game. On a single machine there can be games subject to MGD and content (such as games not offering a prize or other activities) out of scope of the duty.
Where a game is split into stages, it is still treated as a single game (see paragraph 4.13).
2.2.1 Examples of machine games and machines
The following are examples of dutiable machine games. Games:
- played on a gaming machine
- of skill, or games combining chance and skill, played on a machine for a cash prize which exceeds the cost to play the game once - games along these lines include quizzes and tests of coordination or manual dexterity (it is possible for games played on what have traditionally been known as ‘skill with prize’ (SWP) machines to be dutiable machine games)
The following are examples of machines on which dutiable machine games may be played. A:
- machine which is installed in a particular location
- device which is portable (such as a handheld ‘tablet’)
2.3 What machine games are not subject to MGD
2.3.1 Liability to other gambling duties
A game which would otherwise be a dutiable machine game does not count as one if it involves:
- betting on future ‘real’ events, (such as horse or greyhound racing and sports events) where General Betting Duty (GBD) is charged
- playing bingo that is charged with Bingo Duty (BD)
- taking a chance in a lottery that is charged with Lottery Duty (LD)
- playing a game of chance (such as a casino game) that is charged with Gaming Duty (GD)
2.3.2 Non-cash prizes
MGD is not due on any machine game that only offers non-cash prizes.
If a machine game offers both cash and non-cash prizes, it is the size of the cash prize that determines whether or not MGD is due.
Example: in order to play a ‘pusher’ (sometimes called a ‘penny falls machine’) the player inserts a 10 pence piece. The cost to play is therefore 10 pence. The action of the machine on the inserted 10 pence may cause one or several 10 pence pieces to fall into the prize hopper. This means that there is a cash prize on offer which is more than the cost to play so there is a liability to MGD. The pusher game remains liable to MGD even if non-cash prizes (for example, key rings) are placed in the machine (in addition to the 10 pence pieces) and may be pushed out as prizes.
MGD 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 (that is they are played for a cash prize that exceeds the cost to play once)
- played only for a non-cash prize
Vouchers, tokens or tickets which may be exchanged for cash are treated as cash prizes.
Prize items which may be directly swapped for cash are treated as cash prizes.
2.4 Machine games on a foreign-going ship
Once a ship which is leaving the UK for a foreign destination (a foreign-going vessel) is ‘cleared to go foreign’, for MGD purposes, it is treated as outside the UK and there is no liability for MGD on machine game takings. Equally, there is no liability for MGD on machine game takings where machine games are 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.
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 again turned off. No MGD is due in respect of machine game play during the journey.
The takings from machine games on vessels which are not foreign-going are subject to MGD.
The takings from machine games are to be left out of account (that is exempt) from MGD in certain circumstances. The circumstances in which takings are exempt are described in this section.
If all the takings from machine games provided for play on particular premises are expected to be MGD-exempt, then there is no requirement for anyone to register for MGD for those premises.
In all cases (except play on a domestic occasion - see paragraph 3.4) appropriate records must be kept.
3.1 Charitable events
Takings from machine game-play are not subject to MGD if play is at an event:
- that is promoted by, or for, a not-for-profit organisation
- the net proceeds from which are not for private gain
- the main reason for attending the event is something other than playing machine games
Takings from tournament machine game-play are not subject to MGD.
A tournament takes place when 2 or more real players compete against each other by playing a machine game for a prize. Players may have to pay a fee to enter the tournament.
The following examples are not tournaments. A situation where:
- any of the players are not real (for example, if one player is a virtual player or if there is a possibility that the machine itself could ‘win’)
- one of the players - is a registrable person for the premises where the game is played, represents, or is an employee of, the Registered Person, is directed by the Registered Person or their representative or employee
There is no tournament just because the machine has the following characteristics. It is a:
- ‘compensated machine’ operating ‘payout management’ (which means that one person’s winnings may be affected by an earlier win on the same machine)
- ‘community machine’ - a community machine (also known as a ‘linked machine’) is a line of similar machines physically joined by a display panel which may be described as a ‘top box’ (each of the machines in the line operates independently - players of the machines are not playing against each other)
- lottery machine
3.3 Lottery machines
Takings will not be subject to MGD if play is on a machine regulated as a Category B3A gaming machine, provided that the B3A machine is being operated legally.
B3A machines (also known as ‘lottery machines’) are only permitted in certain clubs (see the Gambling Commission website for more information. There is no exemption for takings from machines which are not B3A machines on which lotteries are played.
Important note: automatic lottery ticket vending machines (‘pull tab lottery machines’) are unlikely to attract liability to MGD. As a general rule, they do not constitute games played on a machine. However, where a pull tab lottery machine is made available in such a way that it offers game-play, then MGD may be due.
3.4 Domestic use
Any profits from play on a domestic occasion are not subject to MGD.
Whether or not the circumstances constitute a domestic occasion depends on the facts of the case. Play in the home will normally be a domestic occasion. For example played on personal laptops, smart phones, even where this takes place outside the home, may still be considered as taking place on a domestic occasion.
3.5 Keeping records
In all cases (except play on a domestic occasion) appropriate records must be kept to demonstrate that takings from machine game-play are exempt (see section 20 for more details on record keeping).
3.6 Crown exemption - such as military bases
In certain circumstances, the Crown is considered to be responsible for premises from which machine games are provided for play. In these circumstances, Crown exemption applies.
Crown exemption does not apply simply by virtue of the fact that the Crown owns premises from which machine games are provided for play.
Example 1: the base commander of a military base has arranged for a gaming machine to be placed in a mess on site. Crown exemption applies.
Example 2: machine games are located in a privately run bowling alley in the vicinity of a military base. While the building is owned by the Crown, the Crown has no involvement in the running of the bowling alley. Crown exemption does not apply.
4. Duty rates
4.1 What is the duty rate
The duty rates that apply are the:
- lower rate of 5% applies to ‘Type 1’ machines
- standard rate of 20% applies to ‘Type 2’ machines
- higher rate of 25% applies to ‘Type 3’ machines
4.2 What are the types of machines for MGD purposes
There are 3 types of machines on which dutiable machine games can be played.
Type 1: to qualify as a Type 1 machine it must be demonstrated that the:
- cost to play every dutiable machine game on the machine once does not exceed 20p
- maximum cash prize for every dutiable machine game on the machine does not exceed £10
These are referred to as ‘the Type 1 limits’.
Type 2: to qualify as a Type 2 machine it must be demonstrated that:
- it is not a Type 1 machine
- the cost to play every dutiable machine game on the machine once does not exceed £5
Type 3: are all machines that do not qualify as Type 1 or Type 2 machines.
4.3 What if a machine offers a choice of machine games, some within and some outside a particular Type limits
The duty type attaches to a machine as a whole and not to individual machine games on a machine. This means that if a machine offers a choice of machine games then a single rate of MGD will apply to all the machine games on the machine. The rate will be determined by the game which costs the most to play and or the largest cash prize which can be won. This is the case even if no one ever actually plays the machine games which cost the most to play or which offer the highest cash prize.
Example: a fixed-odds betting terminal (FOBT) offers a mix of games with different stakes and prizes. It will be a Type 3 (higher rate) machine if any of the games cost more than £5 to play.
4.4 What happens if a machine changes its type in an accounting period
An accounting period is a set period of time over which MGD 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, MGD must be paid. An accounting period may also be referred to as a ‘return period’.
If a machine changes its duty type during an accounting period, the net takings must be separately calculated before and after the time of the change. In making a return, these separate calculations must be added into the total net takings under each relevant machine type for the whole accounting period.
Example: a machine offers a single game which is within the Type 2 limits. On 1 May, after close of business, the operator increases the prize so that it is outside the Type 2 limits and falls into Type 3. The change happens within an accounting period which runs from 1 April to 30 June. The operator establishes the takings from the machine from 1 April to 1 May and enters these on his return as takings from a Type 2 machine. He establishes the takings from 2 May to 30 June and enters these on his return as takings from a Type 3 machine.
If each separate amount cannot be identified exactly, the net takings must be apportioned by 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.
4.5 How is the duty charged
MGD is charged on the total net takings from dutiable machine games in an accounting period from each machine type.
Example: in accounting period 1, an operator has net takings of £100 from Type 2 machines and net takings of £200 from Type 3 machines. MGD due is calculated as follows:
100 × 20% (MGD standard rate/Type 2 machines) = £20
200 × 25% (MGD higher rate)/Type 3 machines = £50
Total MGD due = £70
4.6 What are net takings
‘Net takings’ are the takings due for machine game-play less the payouts as winnings (see paragraph 13.1 for further details). 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.
Net takings do not include any float (as long as the float is not an amount paid for machine game play). A float should be taken out of the calculation when a machine is cashed up - records need to be kept to demonstrate that amount taken from machines and not included as takings are genuinely floats.
4.7 What happens if the cash prize paid out is not as advertised
The following concerns a situation where a machine game appears to offer a cash prize exceeding the cost to play once but, in fact, such a prize is not available. In this case, providing that an adult would reasonably believe that it is possible to win a cash prize that exceeds the cost to play once, then the machine game is treated as a dutiable machine game. The appropriate rate of duty (see paragraph 4.1 is determined by the reference to the cost to play and the size of the cash prize that an adult reasonably believes could be won.
Example: the cost to play a machine game once is 10p. A potential prize payout of £50 is clearly advertised. However, the machine has been set-up in such a way that it will never pay out more than 5 pence. On the basis that an adult would reasonably believe that it was possible to win £50, the machine game is subject to MGD at the standard rate.
4.8 How do I deal with prize payout in tokens, vouchers or tickets
In determining whether or not a machine game is subject to MGD, prizes paid in tokens, vouchers or tickets are treated as cash if they can be exchanged for cash (even if they can also be exchanged for something that is not cash). MGD is due if a machine game offers a prize in tokens, vouchers or tickets which can be exchanged for cash to a value that exceeds the cost to play once.
Prizes paid in tokens, vouchers or tickets are treated as non-cash prizes provided that they cannot be exchanged for cash.
In the case of a dutiable machine game paying out in tokens, vouchers or tickets which may be exchanged for cash or non-cash prizes, the value of all prizes paid out (both cash and non-cash) may be offset against MGD liability. In this scenario, where a token, voucher or ticket is exchanged for a non-cash prize the value is calculated by reference to the value of the item (see paragraph 4.9) and not by reference to any cash value for which the token, voucher or ticket could have been exchanged.
4.9 How do I deal with redemption
‘Redemption’ is an offering found, typically, in family entertainment centres. Machines pay out in multiples of ‘redemption tickets’. A choice of prizes is available ‘priced’ in numbers of redemption tickets (for example, the prize of a key ring may ‘cost’ 10 tickets, the prize of a large teddy bear may ‘cost’ 500 tickets).
Machines offering only redemption tickets as prizes are outside the scope of MGD provided that the redemption tickets cannot be exchanged for cash.
MGD is due if a machine game offers as prizes both non-cash prizes and cash to a value that exceeds the cost to play once.
Example: 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.
Paragraph 4.8 explains that the value of non-cash prizes offered for play on a dutiable machine game may be offset against MGD liability. Paragraph 13.3.2 explains how non-cash prizes should be valued in these circumstances.
4.10 How do I deal with machines that are remotely credited
‘Remote crediting’ describes a situation where the amount paid to play is not inserted into the machine. Payment is made, for example, at a counter and a member of staff then causes the amount paid to be ‘credited’ to the machine.
There are no MGD implications in remote crediting. MGD will be due if the amount paid to play, by whatever means, is less than the maximum cash prize on offer.
If you use remote crediting, you will need to keep records that establish a link between payments made and credits to play.
4.11 Do I have to pay MGD on ‘prize every time’ machines or vending machines
MGD is not payable unless the machine is set up so there are game-play and a prize consisting of or including cash of an amount which is more than the cost to play the game once.
It is unlikely that there would be an MGD liability for an ordinary vending machine because there is no game involved. One form of vending machine which may involve game-play is a ‘prize every time machine’, in which case it is unlikely that the MGD prize conditions would be satisfied because all prizes could be expected to be non-cash prizes. However, an MGD liability would exist where, for example, the amount paid was 50 pence and the prize every time was either a keyring worth 5 pence or a £1 coin.
4.12 How do I treat machines that play more than one game
Where a machine allows a person to play more than one game, it must be decided for each game whether it is a dutiable machine game. If a game is not a dutiable machine game then the net takings from that game are not liable to MGD. If a game is a dutiable machine game then the net takings from that game are liable to MGD. This means that on a single machine some games can be subject to MGD and some games can be outside the scope of the duty.
Many machines which offer a choice of games will generate records which will make it possible to record the actual net takings from dutiable machine games. In the case of a machine which does not do this, then the net takings must be apportioned by 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.
4.13 Multi-stage games
Where a machine game has several stages, it will count as a single dutiable machine game and will be liable to MGD 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
5.1 Who is liable to pay MGD
You are liable to pay MGD for dutiable machine game takings from play on premises if for those premises you hold one of the relevant licences or permits mentioned in paragraph 6.2. If you are the tenant of a pub in which machine games are provided for play in reliance on an alcohol licence then you must register for and pay MGD regardless of who holds the alcohol licence.
In respect of dutiable machine game takings from play on premises for which no relevant licence or permit is held and for which no one has registered for MGD, you are liable to pay MGD if you are one of the people mentioned in paragraph 6.3.
Someone who shares in the profits from machine game-play on particular premises is liable for MGD due on their share of the profits if no one is registered for MGD in respect of those premises and HMRC cannot identify a person who should be registered.
Provided that someone is registered for MGD in respect of premises, no one else can be liable to pay MGD for dutiable machine game takings from play on those premises. This is regardless of whether or not the registered person meets their MGD payment obligations.
Paragraph 7.1 explains how to use MGD Register to check that someone has registered.
HMRC recommends that anyone with a potential liability for MGD who is not themselves registered should check the MGD Register annually to make sure there is a continuing registration in place.
Where someone is registered and then deregisters, HMRC may consider that it is not appropriate to assess another registrable person for MGD where that other person has:
- established that someone was registered for MGD
- checked the register within the last 12 months (and can evidence this)
- had no reason to think that the person who was registered has since deregistered
HMRC may decide to assess another registrable person if, for example, there was a change in the course of the year which that other registrable person should reasonably have been aware of and which should have suggested a change in registration status.
6.1 What are the circumstances where MGD registration is required
MGD registration is required for all premises from which dutiable machine games with dutiable takings (that is, not exempt) are provided for play.
6.2 Who should register
If someone holds a relevant licence or permit for the premises then it is that person who should register. Relevant licences and permits are listed below. The registration rules for circumstances where there is no relevant licence or permit are set out in paragraph 6.3.
This is the list of relevant licences or permits. In Great Britain:
- premises licence for gambling activities under the Gambling Act 2005
- family entertainment centre gaming machine permit
- club gaming permit
- club machine permit
- prize gaming permit
- licensing Act (England and Wales) 2003 premises licence for on-sales of alcohol and the equivalent under the Licensing (Scotland) Act 2005
- club premises certificate granted under Part 3 of the Licensing Act 2003
In Northern Ireland:
- registration certificate including a club registration certificate
- bookmaking office licence
- bingo club licence
- amusement permit
- licence allowing the serving of alcohol (but only if a licence permit or certificate listed above is not held for the same premises)
Important note: the above list describes relevant licences and permits in non-legal language. Please refer to the Finance Act 2012, Schedule 24, paragraph 22 for the legal references for these licences and permits.
Note also, in the case of a tenanted pub, where the alcohol licence is held by someone other than the tenant, the tenant will nevertheless be the registrable person for MGD.
6.3 Who should register if no one holds a relevant licence or permit
If no one holds a relevant licence or permit for the premises in question, then one of the following must register. A person:
- who is required to hold a relevant licence or permit, but who does not
- who owns, occupies or leases the premises (or someone who is responsible to that person for the management of the premises)
- responsible for controlling the use of the machines on the premises
- responsible for controlling admission to the premises
- responsible for providing customers on the premises with goods and services
If no one registers then all of the people listed are liable to pay the MGD due for the premises. However, HMRC will only collect the duty once.
6.4 Who should register for MGD at a travelling fair
In the case of machine games at a travelling fair, one of the following must register. The:
- holder of the stall
- person in charge of the fair
If no one registers then both of the people listed are liable to pay MGD for dutiable machine games. However, HMRC will only collect the duty once.
6.5 When should I apply for registration
Unless the special transitional rules apply, (see paragraph 6.8), HMRC must receive your application at least 14 days (or 31 days for non-EU applicants), before machine games are made available for play.
HMRC will not process incomplete applications. If an incomplete application is received HMRC will contact you for the missing information. This may mean that your application takes longer to process.
Important note: 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 MGD Register.
It is possible to apply for registration up to 3 months before it is expected that machine games will be made available for play.
6.6 How should I apply for registration
HMRC encourage applications for registration through the HMRC Online Service. Not only is there more help to complete the application correctly, the information you see is tailored for you, so it is quicker and easier to apply. If you prefer though, you can complete a paper form and send it in by post.
The procedure for registration is set out below. Before registering through the HMRC Online Service you will need to obtain a Government Gateway account. In most cases, when you obtain this account you will automatically be enrolled for associated online services. Once the Government Gateway account is set up, you will receive a unique ID number displayed on screen. You will need this ID number and the password you create every time you wish to log in to the HMRC Online Service. For security reasons, HMRC will not display this unique ID number again or confirm it in writing.
When applying for registration, you must follow the steps set out in the box below.
The following parts of the notice have the force of law under Regulations 4 and 6 of the MGD Regulations 2012
‘Prescribed electronic method’ (HMRC Online Service)
From 1 November 2012, to register online, the applicant must:
- go to the GOV.UK website at: https://www.gov.uk/ and access the HMRC Online Service
- set up a Government Gateway account by following all prompts
complete the application in full through the HMRC Online Service and follow all prompts
- Paper registration application
From 1 November 2012, the applicant must download a copy of the prescribed paper form MGD1: MGD Application to register business from the HMRC website at www.hmrc.gov.uk or, obtain a copy by phoning the HMRC Excise Helpline.
When an applicant has completed form MGD1, they must send it by post to:
Excise Processing Teams
Applications sent to any other address may not be accepted.
6.7 Must I give you the addresses of all the premises for which I want to register
Where premises are covered by a relevant licence or permit (see 6.2), it is only necessary to tell HMRC the address of your principal place of business and indicate that such a licence or permit is held.
In the case of premises not covered by a relevant licence or permit, it is necessary to give HMRC the address if dutiable machine games are or will be provided for play there.
An application for registration may cover more than one premise.
6.8 Are there any special transitional rules for the start of MGD
Yes. Everyone responsible for premises on which machine games will be provided for play at 1 February 2013 will need to register before then (that is before MGD itself starts). HMRC has adapted the normal rules that will apply to the registration process after 1 February 2013 so that they work in the period up to that date. In particular, HMRC has slightly adjusted the time limits so that there is sufficient time to process a large number of applications.
Important note: those who need to register before the start of MGD are strongly encouraged to apply as soon as possible, ideally before 1 January 2013.
The law (Finance Act 2012, Schedule 24, paragraph 40(1)) allows HMRC to modify the rules for registration in the period before 1 February 2013 by making a direction in a notice - see boxed paragraph below).
The Commissioners of HMRC direct that the following rules apply under paragraph 40(1) of Schedule 24 to the Finance Act 2012.
These rules modify the MGD Regulations 2012 for the period leading up to 1 February 2013 in some cases.
Transitional registration application:
- where machine games are being provided for play before 31 December, and it is reasonable to expect that they will continue to be provided for play as ‘dutiable machine games’ on or after 1 February 2013, then the registrable person must apply for MGD registration between 1 November 2012 and 11 January 2013
- where machine games are provided for play for the first time after 31 December 2012, the transitional rules will not apply (instead the rules at paragraph 6.5 above apply)
- there is no requirement to apply for registration in accordance with the transitional rules where none of the takings from machine games are expected to be subject to MGD (that is, they will be exempt from MGD)
- where a person applies for registration before 1 February 2013 and the application is accepted before that date the registration will start on 1 February 2013
6.9 What should I do if I am a registrable person but I am not registered for MGD
If, after 1 February 2013, there are machine games available for play on premises for which you are responsible and there is no registration for those premises, then you, or another registrable person, should apply for registration immediately. You may be liable to a penalty for non-registration or late registration.
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 MGD Register (see paragraph 7.1 to confirm whether or not there is a registration in place).
6.10 What do I do if something changes after I have applied for registration
You must tell HMRC about any changes to or inaccuracies in the information supplied on your application for registration on becoming aware of them (this is a requirement of Regulation 6(4) of the MGD Regulations 2012). You must notify HMRC as follows:
The following parts of the notice have the force of law under Regulations 4 and 6 of the MGD Regulations 2012
Notification of changes to application for registration
The applicant must notify HMRC of any changes or inaccuracies in the information supplied on their application for registration,
where the application was made using the prescribed electronic method, by making the changes through the HMRC Online Service at hmrc.gov.uk
where the application was made on paper, by sending the new or correct information, in writing, to the following address:
Excise Processing Teams
Information sent to any other address may not be accepted.
7. MGD Register
7.1 What is the MGD Register
It is a public list of all MGD registrations available online.
To make a registration enquiry, enter a postcode. All premises at that postcode for which registrations are in place will be displayed. Where a business holds relevant licences or permits for premises (see paragraph 6.2) then in most cases, only the principal place of business is displayed even though the registration covers all the premises.
It is free to make a registration enquiry.
7.2 Will I receive confirmation that my registration is listed on the MGD Register
If your registration application is accepted, HMRC will add your name to the MGD Register. The date on which HMRC do this will be the date of registration. Registrations cannot be backdated. HMRC will send you in the post a certificate called a ‘MGD (MGD) certificate of registration’. This will give you your MGD reference number which will then appear on your returns and other MGD documentation. If you applied for registration through the HMRC Online Service and provided your email address HMRC will additionally send your certificate by email.
You do not have to display your certificate.
7.3 Can I use the MGD Register to check that someone else is registered for MGD
Yes. Paragraph 7.1 explains how to make a registration enquiry. If you want to know about registration for premises that are not someone’s principal place of business you will also need know their principal place of business in addition to their full name or company name.
You are 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.
7.4 What happens if my details change after I have registered
You should write to HMRC with the correct information. The address to write to is:
Excise Processing Teams
7.5 What happens if HMRC discover that the information on the MGD Register is incorrect
If registration details are incorrect, we may update the details providing that we have the relevant information. We will tell the registered person about any changes within 7 business days of them being made.
Alternatively,we may ask the registered person to send correct information. In this case, we will make the changes to the Register and tell the Registered Person within 7 business days.
Important note: the registered person must provide the information requested within 30 days from the date of HMRC’s request.
Or, we may require that the registered person submits a new application for registration. If that application is accepted, we may register the person again under a new MGD registration number. We will cancel the current registration from the time the new one starts.
Anyone making a registration enquiry is entitled to rely on the information on the MGD Register at the time they make their enquiry. You are 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.
8. Group registration
8.1 What is a group for the purposes of MGD
A group is an arrangement for simplifying MGD accounting administration. Only one MGD return is required to be submitted to cover all members of a group for each period. Note that all group members are jointly and severally liable for the MGD due.
8.2 When is group registration allowed
Group registration may be allowed if:
- all of the proposed members are corporate bodies and are registrable persons in their own right (there must be at least 2 prospective members of any group)
- all have the same common controller
- all are resident or have an established place of business in the UK
- all have agreed to be part of the group
- any security requested has been paid
- one group member has agreed to be the Group Representative Member (GRM)
HMRC may refuse a group registration application if it appears necessary for the protection of revenue.
8.3 How is a group registration application made
The GRM is responsible for making an application for group registration.
Before applying through the HMRC Online Service, the GRM will need to obtain a Government Gateway account. In most cases, this will automatically result in an enrolment for the associated online services. Once the Government Gateway account is set up, a unique ID number will be displayed on screen. The GRM will need this ID number and the password they have created, every time they log in to the HMRC Online Service. For security reasons, HMRC will not display this unique ID number again or confirm it in writing.
The group registration process is set out in the following boxed paragraphs:
The following parts of this notice have the force of law under Regulation 18(1) of the MGD Regulations 2012
‘Prescribed electronic method’ (HMRC Online Service)
To register online, the GRM must:
- go to the HMRC website at: hmrc.gov.uk and access the HMRC Online Service
- set up a Government Gateway account and follow all prompts
- complete the application in full through the HMRC Online Service and follow all prompts, together with any supplementary information in respect of group treatment
keep records of the on-screen automatic acknowledgment confirming completion of the registration application, together with the unique acknowledgment reference number
- Paper registration application
The GRM should either download from the HMRC website at www.hmrc.gov.uk or obtain by phoning the HMRC Excise Helpline
- MGD1: MGD Application to Register a Business
- MGD3: Application for Group Treatment
- MGD3a: Corporate Body to be included in a Group
The GRM should also download or obtain the following if relevant:
- MGD2: Partnership details
- MGD5: Premises details
The GRM must complete and send forms by post to:
Excise Processing Teams
Forms sent to any other address may not be accepted.
8.4 What happens if there are changes after the application is made
The GRM must notify HMRC within 7 working days of becoming aware of a change or an inaccuracy in the application. Additional or corrected information must be provided as appropriate.
Confirmation must be provided that all group members agree to the changes being made or that the information being provided corrects an inaccuracy.
9. Compulsory registration
HMRC can compulsorily register someone who is a registrable person (see paragraph 6.3) for premises where it appears that dutiable machine games are available for play there but no one is registered.
Before making a compulsory registration, HMRC will issue a ‘registration notice’ listing all premises for which compulsory registration is being considered.
If there is no appeal within the specified time limits (see paragraph 9.1 below), or an appeal is not successful, HMRC will make a compulsory registration from the date the registration notice is issued, unless someone else has registered in the meantime.
9.1 What happens if I do not agree with a registration notice
If you receive a registration notice but you do not believe that you should be registered for the premises listed, you can appeal against HMRC’s decision that:
- you are a registrable person for the premises
- dutiable machine games are available for play at the premises
Any appeal must be made in writing within 30 days from the date of the registration notice. (See section 25 which covers the appeal process).
A registration notice can cover more than one premise. 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.
10.1 Can I cancel my MGD registration
Yes, if you cease to be a registrable person because you:
- cease trading
- no longer provide dutiable machine games for play
- you wish to join a group or a partnership
you will need to follow the procedure at paragraph 10.2 below.
10.2 Notice of deregistration
If you wish to deregister you should notify HMRC as set out below. 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.
You must include in your deregistration notification the following information:
The following rules have the force of law under Regulation 8 of The MGD Regulations 2012
If a Registered Person (RP) wishes to deregister they must either:
1. Deregister using the prescribed electronic method (HMRC Online Service), or
2. Notify HMRC in writing confirming that:
- they are registered for MGD, including their registration number
- they are not (or will not at the time of deregistration) be a registrable person in respect of the premises concerned, or that they wish to join a group or partnership and
- the date from which deregistration should take effect
The RP must send the notice to the following address:
Excise Processing Teams
Notices sent to any other address may not be accepted.
10.3 How is deregistration processed
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 MGD Register within 14 days from the date specified in your notification. HMRC will write to you to confirm your deregistration.
Important note: HMRC will issue a return for any whole or part accounting period immediately prior to deregistration for which a return has not be received. This return must be completed and any duty liability paid.
10.4 Can HMRC remove a name from the MGD Register even if someone doesn’t ask them to
Yes, if it appears to HMRC that someone has ceased to be a registrable person or has joined a group or partnership.
10.5 Will you remove my name from the MGD Register without telling me
No. HMRC will write to you within 7 business days of your name being removed from the Register to tell you that you have been deregistered and give the reasons for the deregistration.
10.6 What happens if my name is removed from the MGD Register by mistake
If we deregister you by mistake we can reregister you from the date of the mistake using the same MGD registration number.
If you believe that your name has been removed from the MGD Register by mistake you should write to HMRC immediately at:
Excise Processing Teams
11. Profit sharers
11.1 What liability for MGD may attach to profit sharers
In certain circumstances, someone who is not responsible for premises where machine games are provided for play, but who shares in the profits from machine game-play (a ‘profit sharer’), may be liable to MGD. The circumstances are:
- 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
In these circumstances, HMRC may issue a profit sharer with a notice giving the profit sharer 30 days (or another period agreed with the profit sharer) 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 MGD Register
If the profit sharer cannot satisfy us on these points within the time limit, we may assess the profit sharer for MGD on their share of the profits from machine game-play going back up to 4 years. HMRC will not refund any MGD paid by the profit sharer even if the person responsible for the premises is subsequently identified (HMRC will not collect any amount paid by the profit sharer from the person responsible for the premises).
12. Accounting periods
12.1 What is a standard accounting 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 31 October
Stagger B Ending 28(29) February 31 May 31 August 30 November
Stagger C Ending 31 March 30 June 30 September 31 December
Examples. An accounting period ends:
- 31 January (Stagger A), next accounting periods starts on 1 February and runs through to 30 April
- 28(29) February (Stagger B), next accounting period starts 1 March and runs through to 31 May
The accounting period rules have been adapted for the circumstances of the first few months after the start of MGD. This is explained at paragraph 12.5.
12.2 What will be my first accounting period if my registration starts after the first of the month
Each accounting period must include at least 1 full month. If a registration begins 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.
Example: a registration starts on 21 May. The first accounting period will end on 30 June or 31 July or 31 August depending on the stagger.
12.3 Can I apply for a preferred accounting period stagger
Yes. You can tell HMRC which stagger you would prefer and how to do this is explained below. HMRC will try to meet your preference but cannot guarantee this.
You may, for example, prefer an accounting period stagger which results in 1 accounting period ending on the day of your financial year-end, as this may reduce the number of accounting adjustments you need to make when you prepare your year-end accounts.
Electronic application: when you register through the HMRC Online Service you will be invited to select a stagger period.
Paper application: when we receive your paper registration application, we will allocate an accounting period stagger. If you wish to request an alternative stagger, please write to:
Excise Processing Teams
12.4 Can I apply for non-standard accounting periods
Yes. How to do this is explained below.
Non-standard accounting periods must be at broadly 3 months, with the flexibility to move the start/end dates of each period up to 16 days forwards or backwards from what would have been the normal start/end date. In practice, this means you can arrange accounting periods so that each ends on a day that suits you.
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 HMRC does not allow the non-standard accounting periods that you ask for, you can appeal, (see section 25 for more information).
Electronic application: when you register through the HMRC Online Service if you wish to apply for non-standard accounting periods please follow the prompts.
Paper application: if you wish to apply for non-standard accounting periods, please write to:
Excise Processing Teams
12.5 What are the special transitional rules for accounting periods at the start of MGD
The following directions have the force of law under paragraphs 14(2), 14(5), 40(1) and 40(3) of Schedule 24 to the Finance Act 2012 (FA12)
Transitional provision - Accounting periods
a) transitional provisions apply to accounting periods allocated in respect of successful registration applications before 1 February 2013 (the start of MGD)
(b) in the case of successful registration applications before 1 February 2013, the start date for the Registered Person’s (RP’s) first accounting period will be 1 February 2013
(c) all first accounting periods will be staggered as follows:
- Stagger A (2 months) - 1 February 2013 - 31 March 2013
- Stagger B (3 months) - 1 February 2013 - 30 April 2013
- Stagger C (4 months) - 1 February 2013 - 31 May 2013
d) All second and subsequent standard accounting periods will cover 3-monthly calendar periods.
13. Duty calculations
13.1 How do I work out how much duty to pay
Paragraph 4.5 explains that MGD is charged on the total net takings from dutiable machine games in an accounting period for each machine type.
To work out how much MGD is payable in an accounting period:
- establish which machines are Type 1 , Type 2 and Type 3 machines
- calculate what are the charges to play each machine type (that is, what has been paid in, for example, stakes)
- calculate the value of the prizes paid out from each machine type
- deduct the value of the prizes paid out from each machine type from the charges to play each machine type - the result is the net takings for each machine type
- apply the appropriate MGD rate to the net takings (see the calculation in paragraph 4.5) - the result is the amount payable in MGD for each machine type
- add together the amount of MGD payable for each machine type
- take into account any under-declarations notified on the return (paragraph 15.1.2) or any losses from the previous accounting period (paragraph 13.6)
Important note: 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.
Paragraph 4.4 explains what to do if a machine changes type during an accounting period.
13.2 How do I split the takings between dutiable games and other content
As a general rule, machines which can offer mixed content subject to different taxes (that is, machine games subject to MGD and games or other activities not subject to MGD) have the functionality to establish which of the takings come from which games/activities.
If you have a machine that offers mixed content and does not have the functionality to establish which proportion of the takings come from which games/activities, then the law allows you to make an estimation using a suitable method. Whatever method you decide to use must produce a result which is just and reasonable. 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 allow them to report the takings from individual games/activities. There is nothing about these 2 machines which would suggest that their takings and the way they fall to the different games/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.
To the extent that machines do not have the functionality to establish which proportion of the takings come from which games/activities, HMRC would expect that after 1 February 2013 the industry will work to make sure that all new machines have appropriate functionality.
13.3 How do I value prizes
13.3.1 Cash prizes
The value of a cash prize 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.
Vouchers, tokens or tickets which may be exchanged for cash are treated as cash prizes.
Prize items which may be directly swapped for cash are treated as cash prizes.
13.3.2 Non-cash prizes
Where non-cash prizes are awarded as a result of play on a machine game which is liable to MGD (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 prizes may be deducted from dutiable takings subject to MGD.
For these purposes, the value of a non-cash prize is - where the prize was bought from:
- an independent third party - the (VAT-inclusive) cost actually paid
a connected person - the lesser of the price:
- actually paid
- that would have been paid had it been bought from an independent third party
In the case of a non-cash prize awarded through a voucher, the relevant value is that of the prize. If the 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.
Example: a machine game offers as prizes both cash and redemption tickets which may be exchanged for non-cash prizes. The game pays out 1,000 redemption tickets each with a value of 1p shown on each ticket (so 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 MGD purposes is £8.
Important note: 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 MGD 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.
13.4 How do I 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.
Example: on emptying a machine at the end of an accounting period it is discovered that it contains 3 fake £10 notes. This £30 is treated as charges to play and included in the MGD calculation 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 net takings liable to MGD. If the precise value of a charge to play cannot be established, for example, because the charge was in the form of something with a monetary value rather than actual cash, then the value may be decided using a method which provides a just and reasonable result. It must be possible to demonstrate that method is fair otherwise further tax may be payable, together with interest and penalties.
If a composite charge is made (that is, a charge for machine game-play and something else) it should be established how much of the charge relates to machine game-play and how much to any other thing. 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.
In the case of a charge purportedly made for something other than machine game play, if 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.
13.5 How do I deal with foreign currency
Amounts included on an MGD return must be in sterling. Any amounts (charges to play or payouts) in another currency must be converted into sterling. The conversion must be carried out on the last day of each accounting period and 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 in the period they actually took place.
To make the conversion you should use the London closing rate for sterling on the previous day (which should be the day before the last day of your accounting period).
13.6 Can I carry forward losses into the next accounting period
Yes. If your duty calculation for an accounting period provides a negative figure for MGD due, then you can carry forward this negative amount to the next accounting period.
You will need to show any negative figure for MGD due in box 11 on the return for the accounting period in which the negative figure occurred (return A).
When you make your next return (return B) you should enter the box 11 figure from return A into box 10 of return B. This will reduce the duty due in the accounting period to which return B relates.
HMRC would expect there to be very few cases of losses in an accounting period. A negative figure for MGD 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. Further, if there is more than 1 machine on the premises even if 1 machine incurs a loss it is extremely unlikely there will be a loss across all machines taken together. Consequently, 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.
13.7 What happens if I still have negative duty in subsequent accounting periods
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.
13.8 What if I cease trading with a negative duty due in my last accounting period
Your duty due for the last accounting period will be nil. You are not entitled to any refund or repayment of MGD for that negative amount.
14. Duty returns
14.1 How do I account for the duty
14.1.1 Electronic returns
The easiest and quickest way to submit your return is to complete it electronically through the HMRC Online Service. To do this you will need to have registered through the HMRC Online Service.
If you complete an online return you will have access to online help which will make it easier to complete. You can also be confident that your completed return will not get lost in the post. In addition, you can also keep track of your MGD affairs by accessing details of previously submitted returns and payments.
HMRC encourage you to use the HMRC Online Service.
14.1.2 Paper return forms
Alternatively, you may submit a paper return, if you’re registered:
- by means of a paper form
- through the HMRC Online Service, but did not then sign-up (‘enrol’) to submit MGD 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, you can phone the HMRC Excise Helpline to obtain a duplicate.
Important note: 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.
14.2 When must I make my return
A registered person must submit an MGD return so that HMRC receives it 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.
Section 16 discusses payments. Note that the time limits for payment are the same as for returns.
14.3 Where must I send my completed MGD return
The following rules have the force of law under Regulations 4(3) and 12(2) of the MGD Regulations 2012
- Electronic return form. If a Registered Person (RP) chooses to file an electronic duty return, they must do so through the HMRC Online Service. To use this method, the RP must first have registered for MGD using the HMRC Online Service.
2. Paper return form. If the RP chooses to make a paper MGD return, they must do so on Form MGD6: MGD Return, including their full business details and MGD Registration number (where not already included). They must send the completed form by post to:
15. Under or over-declared duty
15.1 What if I have made a mistake on a duty return
This section explains how to:
- amend your MGD records if you discover they contain errors
- correct errors you discover on MGD returns you’ve already sent to us
- claim a refund if you’ve overpaid MGD
If you find an error in accounting for MGD that is not covered by this notice you should contact the HMRC Excise Helpline.
15.1.1 What if I record or calculate my MGD incorrectly
If you’ve not yet completed your Excise Duty Account or 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 MGD figure in your records for the same period. The correct MGD figure will then work its way through to your MGD return, as normal.
If you’ve already sent us your return you will need to correct the error by following one of the methods in section 15.1.2.
15.1.2 Under-declarations or understated duty
If you have made a mistake on a return or returns which has resulted in you declaring to HMRC less than you actually owe, you must correct that error in one of the following ways.
Method 1: writing to HMRC about the error at the following address:
HM Revenue and Customs
CITEX Written Enquiry Team
(a) You may, if you wish, use this method for errors of any size. Your letter should detail the amount of the errors and the circumstances, in which it came about,
or (b) subject to conditions
Method 2: entering the amount of the under-declaration in box 9 on your next MGD return.
You can only use box 9 if the overall amount of the under-declaration:
- does not exceed £10,000 (net value)
- 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 that 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.
15.1.3 When should I correct errors
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 MGD 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 MGD accounting period, an error record will help you decide whether to use method 1 or method 2 to correct any errors.
You should normally wait until the end of the current accounting period before deciding which method to use. However, if an individual error is so large that it will inevitably be outside the limits for method 1 you should make an error correction report to HMRC in writing as soon as possible.
You should be aware 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.
15.1.4 Will I be liable to a penalty
We will not charge a penalty if you took reasonable care to get things right but your return was still wrong. Some of the ways you can show that you took reasonable care include:
- keeping accurate records so that you can complete your tax records accurately
- checking with a tax adviser or with us if you are not sure about anything
We may charge you a penalty if you send us a return or other document that contains an inaccuracy, and the inaccuracy:
- 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 do as much as you can to make sure that 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 that we are 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 that it contains a careless inaccuracy, we may be able to reduce the penalty to nil if you make an unprompted disclosure.
If a RP discovers a non-careless error, HMRC expects that they will take steps to correct it. If the Registered Person (RP) does not take steps to correct it, 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 should write to the following address and tell us if you have made a careless error or deliberate inaccuracy regardless of its size or value:
HM Revenue and Customs
CITEX Written Enquiry Team
Correcting errors using box 9 of the return is not a disclosure for the purposes of the penalties rules. If you consider that the error corrected using box 9 was a result of careless behaviour you will 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. People make mistakes and we do not expect perfection. When considering whether an error was careless, we are simply seeking to establish whether the RP has taken the care and attention that could be expected from a reasonable person taking reasonable care in similar circumstances.
15.1.5 What if I don’t correct MGD errors and HMRC find them
If HMRC find under-declarations of MGD on your MGD returns we will 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 MGD Regulations 2012
a) Correction of errors
The ‘understatement’ refers to under-declared duty in any previous MGD returns. Where the errors comply with all conditions described in Regulation 14(1), the Registered Person (RP) may include the total under-declared duty in box 9 on their next MGD return.
(b) Errors in excess of conditions
HM Revenue and Customs
CITEX Written Enquiry Team
15.1.6 Over-declarations or overstated duty
If you have made an error on a previous MGD return which has resulted in you paying too much duty, you may be entitled to be repaid the amount of your overpayment. Under the law* overpayments of MGD can only be claimed by writing to HMRC.
Any claim must include all relevant information. There is no specific form for making claims but claims must:
- be in writing
- be on headed paper
- include your registration number
- include your full bank account details
- include the amount of claim
- include the name of registered trader
- include the name of person making the claim
- include the contact telephone number
Send any claim to the following address:
St Mungo's Road
You should keep all documentary evidence to support a claim, including documents showing how and when the error arose.
- Regulation 9 of the Revenue Traders (Accounts and Records) Regulations 1992.
15.2 How can I avoid a penalty
You can avoid a financial penalty by making sure that you give complete and correct information on your returns. Also make sure that returns are received by HMRC and payments cleared by the due dates.
Remember, HMRC can charge a penalty if:
- your return or other tax document is not correct so that you don’t pay enough duty
- you do not tell us if we have sent you a duty assessment that is too low
If there is a penalty due, HMRC may be able to reduce it depending on the circumstances. Some penalties may be reduced to zero.
You have the right to appeal if HMRC issue you with a penalty (see section 25).
For further information on appeals or penalties please see the GOV.UK website at https://www.gov.uk/.
16. Payment of duty
16.1 Who is responsible for paying the duty
Normally the person registered for MGD with HMRC (the RP) is responsible for paying duty due. If there is no registration then a registrable person or profit sharer will be liable for MGD in respect of the relevant premises. See as follows:
- paragraph 6.2 - who should register
- paragraph 6.3 - who should register if no one holds a relevant licence or permit
- section 11 - profit sharers
In the case of a group registration the GRM is expected to pay duty due. However, all group members are jointly and severally liable for payment.
16.2 How do I pay the duty
HMRC accepts payment in a number of ways as detailed below.
The following rules have the force of law under Regulations 13(2)(a) and 13(3)(b) of the MGD Regulations 2012
The Commissioners prescribe that payment may be made:
By Direct Debit:
- The Registered Person (RP) must pay by variable Direct Debit payment plan, Bacs, CHAPS or Faster Payments.
For a variable Direct Debit payment plan the RP must go to the GOV.UK website and follow the instructions to set up a Direct Debit plan. You will need:
- your MGD registration number
- your bank sort code, account holder(s) name, and account number, and
- bank name and address.
Variable Direct Debit payment plans can be used to pay amounts up to a maximum of £20 million.
Direct debits for the payment of MGD can only be set up online.
(b) By Post
Cheques must be made payable to HMRC only’ followed by the RP’s MGD registration number and sent to:
Payment can also be made at a bank.
Direct Debit collection date
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).
16.3 How do I pay MGD if I am not the Registered Person
If you are not registered for MGD but are liable to pay an amount of duty, HMRC will send you details explaining how to pay.
17.1 Do I have to provide any financial security for MGD
Depending on your circumstances, we may ask you for security.
17.2 What is the relevant law on security for MGD
Regulation 11 of the MGD Regulations 2012 provides that, if HMRC believe you might not pay, registration can be refused unless you provide security.
Even if you have registered for MGD, if HMRC believe that you may not pay the duty you owe you may be required to provide security as a condition of remaining on the MGD Register. If you do not provide this security your registration may be cancelled.
17.3 Under what circumstances will HMRC require security
HMRC may require you to provide security, for example, if:
- you have 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 MGD are connected with past failures to pay any tax due (MGD or otherwise)
These examples of situations where HMRC may ask you to provide security are not exhaustive.
17.4 What warning will I receive that HMRC require security
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.
17.5 How much security will HMRC require from me
HMRC bases the amount of security required on a standard formula which reflects the minimum time it would take us to recover the debt if, in future, you do not pay the MGD you owe. HMRC calculate the amount of security using the most accurate information available at the time. This information may include the tax declared on MGD returns from:
- your current business
- your previous businesses
- businesses of a similar size, with similar customers and in the same trade class
HMRC may also add any outstanding tax from your current MGD Registered business to the calculation, before issuing a Notice of Requirement of Security in respect of that business.
Generally, the amount of security required will be based on the amount of the MGD it is estimated you would owe over 6 months.
17.6 What forms of security will HMRC accept
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.
17.7 When will I have to provide the security
The Notice of Requirement of Security will tell you by when you need to provide security. Please contact HMRC if you need more time to make the necessary arrangements.
17.8 What will happen if I do not provide the security
If you do not provide the security by the time specified in the Notice of Requirement of Security, HMRC will not register you for MGD. If you are 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 an MGD registration. 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. (See paragraph 22.3.1 for more information). In these circumstances you might also commit an offence.
*Unless it is expected that all the takings will be MGD-exempt.
17.9 How long will you hold the security for
Where HMRC have required a person to provide security HMRC will review this requirement every 2 years. If HMRC consider that there is no longer a risk to the revenue, then the security will be returned. You should contact HMRC if you have any information that you feel may cause HMRC to decide that there is no longer a risk to the revenue. In this case, HMRC will review the requirement for security if it is appropriate to do so.
17.10 When will you use the security
If you fall behind with payment of MGD, HMRC may offset any security you have provided against the MGD you owe. HMRC will write to you to let you know of any such offset, and they may then ask you to provide a further amount of security. If you do not provide the further security required HMRC may cancel your registration. (See paragraph 17.9)
18.1 How can I communicate with HMRC about MGD
You will need to communicate with HMRC, in particular, to register, to submit returns and to make payments. Communication methods are detailed below.
18.1.1 Electronic communication
The following requirements have the force of law under Regulations 4 and 16 of the MGD Regulations 2012
The ‘prescribed electronic method’
Applications for registration and returns may be submitted through the HMRC Online Service. Go to the GOV.UK website at: www.gov.uk and access the HMRC Online Service. In order to access this service, the applicant must have set up a Government Gateway account.
18.1.2 Communication by post
The following requirements have the force of law under Regulations 4, 6(2) and 17(3) of the MGD Regulations 2012
Paper registration applications must be made on the form MGD1: Application to register a business. The applicant can download a copy from the GOV.UK website at www.gov.uk or obtain one by phoning the HMRC Excise Helpline. The completed form must be posted to:
Excise Processing Teams
Forms sent to any other address may not be accepted.
(b) Paper returns
Paper returns must be made on form MGD6: MGD Return. The completed return must be sent to:
Forms sent to any other address may not be accepted.
18.2 Can I change how I submit returns
To change from electronic to paper returns, you will need to access the HMRC Online Service to de-enrol from the electronic process. Once you have de-enrolled, you will automatically receive paper returns from that date.
If you still wish to submit electronic returns but only wish to cancel HMRC’s e-prompt, reminding you when returns are due, please follow the process in the boxed paragraph below.
The following requirement has the force of law under Regulation 17(3) of the MGD Regulations 2012.
To withdraw consent for the Commissioners to communicate electronically, the Registered Person (RP) must go into their online account on the HMRC Online Service and remove their email address from their contact details.
19. Agents and tax representatives
You can, if you wish, appoint someone in the UK to manage your MGD affairs. HMRC describes a person acting on your behalf as an ‘agent’. An agent can be an accountant but does not have to be. You, and not the agent, will still remain liable for paying MGD and for any penalties.
Someone wishing to act as an agent must register for the MGD Agents Service (through the HMRC Online Service). Once registered, an agent can seek your authority to act on your behalf online. When HMRC receive an agent request we will send you a letter explaining how to make an authorisation. HMRC cannot discuss your MGD affairs with your agent until your agent has been authorised.
Prospective agents can gain an understanding of the responsibilities of the role by looking at the ‘agents’ section on the GOV.UK website.
An agent acting for several people will need to submit an individual return for each client. There is no facility for bulk returns or payments covering more than one person’s liability.
19.2 UK representative (or overseas representative)
If you are liable to MGD but are resident outside the European Union (EU), you may need to appoint and operate through a UK representative who will be responsible for all your UK MGD tax affairs. The UK representative must have consented to both act on your behalf and to be jointly and severally liable to all your MGD obligations.
A UK representative is different from an ‘agent’ described above. In particular, a UK representative is jointly and severally liable for MGD.
HMRC may require you to both appoint a UK representative and provide a security.
20. Records and accounts
20.1 What records must I keep
People liable to MGD are ‘revenue traders’. Revenue traders must keep certain records. A profit sharer is a revenue trader if no one is registered for MGD in respect of premises at which dutiable machine games are provided for play and a registrable person cannot be identified.
The record keeping requirements for revenue traders are explained in Notice 206: Revenue Traders Records.
The law relating to revenue traders and record keeping is the Revenue Traders (Accounts and Records) Regulations 1992. This covers the:
- records revenue traders must keep
- time at which records must be made
- period for which records must be kept
Important note: separate record keeping rules apply for VAT purposes which are explained in VAT guidance including Notice 700: The VAT Guide and Notice 706: Partial Exemption.
If you are registered for VAT, your records may contain information also required for MGD purposes. Providing your records are cross-referenced and the audit trail is clear and easy to follow, you are not expected to duplicate your records.
20.1.1 Excise Duty Account
The law* requires that all MGD Registered Persons must keep an Excise Duty Account. This must show all the information needed to complete each MGD return and how the figures on the return have been calculated. 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. In addition, if you keep good records HMRC will find that checking them is more straightforward and efficient, which will also be beneficial for you.
*Regulation 5(1) of the Revenue Traders (Accounts and Records) Regulations 1992 (SI 1992/3150).
20.2 What additional records must I keep
HMRC has the power to direct that you keep specific additional records. For more information see the boxed paragraphs below and Notice 206: Revenue Traders Records.
The following additional records are required as a minimum to demonstrate that the figures you declare on your MGD return are correct.
The following rules have the force of law under Regulations 6 and 8 of the Revenue Traders (Accounts and Records) Regulations 1992
- Dates and times when your machines are in use
Those responsible for premises on which machine games are provided for play must keep a record of 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.
2. Details of any changes to your machines
Those responsible for premises on which machine games are provided for play must keep a record of changes to the:
- software or games on a machine
- percentage level of the prize payout from machines
- Details of third party arrangements
Those responsible for premises on which machine games are provided for play must keep a record of arrangements with third parties to:
- upgrade machines
(including records of arrangements with third parties to make the changes described below).
- Accounting for cash in and out of machines
Those responsible for premises on which machine games are provided for play must record cash in and cash out in an 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, and
for machines subject to MGD which pay out non-cash prizes (including redemption machines), the VAT inclusive amounts paid for prizes.
5. Other payouts to customers
Those responsible for premises on which machine games are provided for play must record all payouts made in respect of machine game-play other than through a machine.
6. Storage of records, documents and accounts
Those responsible for premises on which machine games are provided for play must keep:
- trading and profit and loss accounts
- balance sheets
- bank statements
- records used for the purpose of completing MGD returns
- any additional records and documents relevant to the business of providing dutiable machine games for play
Records must be kept for 4 years in a readily accessible form and manner.
HMRC will review the minimum record keeping requirements on a regular basis in light of experience.
HMRC recommend that 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.
HMRC can also direct you to keep additional records in individual cases (for example, your meter readings of takings and payouts for individual machines) where it is proving difficult to check your MGD affairs.
If you have strong internal controls (for example, modern machines with auditing software and good audit trails) and HMRC can see that these controls work, and then we may be able to rely on them to check your MGD affairs. This could speed up processes and reduce your administrative burden. If you do make use of this auditing software, you are required by law to keep these additional records.
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.
20.3 Where do I have to keep the records
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.
20.4 Do you have the right to see my records
Yes. 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.
21.1 What is the law on MGD
The primary law for MGD is Section 191 and Schedule 24 of the Finance Act 2012. There is also secondary legislation: the MGD Regulations 2012 and the MGD (Exemptions) Order 2012.
21.2 What other legal powers do HMRC have
HMRC officers have a responsibility, both to the Exchequer and to taxpayers, to make sure that the right amount of MGD is paid. In order to fulfil this responsibility HMRC may, for example, visit premises to look at records, accounting systems and business practices. HMRC may also ask for additional information to evidence declarations made on returns.
HMRC will normally make an appointment in advance to visit you. However, HMRC may also make unannounced visits.
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 an HMRC officer has reasonable cause to suspect that a business offering machine games for play has been, or is being, promoted or operated. In this case, an HMRC officer may remain on the premises so long as there remains 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 MGD
22. Civil penalties
22.1 In what circumstances might I get a penalty
The following penalties may be applied for failures to comply with MGD obligations.
22.1.1 Errors in returns
If you make an error in a MGD return you may be liable to a penalty under Schedule 24 of the Finance Act 2007.
22.1.2 Failure to make returns
If you are required to make an MGD return and fail to do so on or before the filing date then you may be liable to a penalty under Schedule 55 to the Finance Act 2009.
22.1.3 Failure to register
A penalty under Schedule 41 to the Finance Act 2008 may be applied to anyone making a dutiable machine game available for play on premises not subject to an MGD registration.
22.1.4 Failure to make payments on time
If you fail to pay the amount of MGD that you owe by the due date then you may be liable to a penalty under Schedule 56 of the Finance Act 2009.
22.2 Are there any factsheets about penalties
Yes. Factsheets about penalties for errors in returns and failures to register can be found here:
22.3 Can HMRC seize machines
22.3.1 Seizure and forfeiture
Yes, although HMRC will not normally seize machines. HMRC can seize a machine if an HMRC officer finds it on premises and is satisfied that:
- it is being, has been, or is about to be made available for playing dutiable machine games
- no-one has registered in respect of the premises, and there is a serious risk that MGD will not be paid
- MGD is due in respect of play on the machine but has not been paid
A machine seized by HMRC may be forfeit.
22.4 What offences apply to MGD
It is a criminal offence for a person* or a body corporate** to knowingly be concerned in or to take steps with a view to the fraudulent evasion of duty*. The penalties include imprisonment.
*Paragraph 37(1) to Schedule 24 of the Finance Act 2012 refers
**Paragraph 37(5) to Schedule 24 of the Finance Act 2012 refers
It is important that you phone the HMRC Excise Helpline if you are unsure of your tax obligations or if you do not understand something.
22.5 What if I fail to pay the duty that is due
If you fail to pay MGD that you owe, whether in full or in part, HMRC may commence civil proceedings to recover the debt.
In serious cases, HMRC may ask the Gambling Commission to review your operating licence.
22.6 What do I do if I don’t agree that I should be charged a penalty
If you do not agree with a penalty notice, you can:
- ask for the decision to charge you a penalty to be reviewed by an HMRC officer not previously involved in your case
- appeal to a tribunal independent of HMRC to decide the matter
If you opt for a review you can still appeal to the tribunal after the review has finished.
If you want a review you should write to HMRC (the postal address can be found on the GOV.UK website by looking at the ‘Excise:enquiries’ section) within 30 days of the date of the letter, giving your reasons why you do not agree with the decision and providing any further information you want to be taken into account.
If you want to appeal to the tribunal you should send them your appeal and a copy of this letter within 30 days of the date of this letter.
You can find more information in the HMRC factsheet How to appeal an HMRC decision - Indirect Tax.
You can find out more about tribunals on the Tribunals Service website or Telephone: 0845 223 8080.
23.1 Do I have to pay interest if I make a payment late
Yes. Late payment interest accrues if you are late in paying what you owe. Late payment interest is calculated 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 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.
23.2 Will you pay interest if you refund an amount of MGD
Repayment interest accrues where appropriate and is also 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.
Machine games that are liable to MGD 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 is 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 undertake quarterly and annual partial exemption calculations so they can justify their input tax claim. The normal VAT partial exemption rules will apply.
More information about VAT is available.
25. Reviews and appeals
25.1 What if I think HMRC has made a wrong decision
In certain cases if you do not agree with a decision HMRC has made you can:
- ask for it to be reviewed by an HMRC officer not previously involved in the matter
- appeal to an independent tribunal
Decisions which you can ask to be reviewed and may appeal are a decision:
- to refuse to allow non-standard tax periods
- to refuse registration or to deregister someone
- to require security
- to require the appointment of a UK tax representative
- that you owe an amount of duty assessed by HMRC
- that you are liable to pay an amount of duty
- apply a penalty
See paragraph 25.4 below for more information.
25.2 Is there a time limit to ask for a review or an appeal
Yes. If you want HMRC to review a decision, you must write to the person who issued the decision letter within 30 days from the date of that letter. Your written request should set out clearly the full details of your case, the reasons why you disagree with the decision and you should provide any supporting documentation. You should also state what result you expect from the HMRC review. HMRC will complete a review within 45 days, unless we agree another deadline with you. HMRC will not take any action to collect any disputed MGD while the review is being carried out.
25.3 Can I still appeal after you have completed your review
If you still want to appeal to the Tribunal after the HMRC review has been completed you should send details of your appeal to the Tribunal within 30 days of the date of the HMRC review decision letter.
25.4 Where can I get more information
You can find further information about reviews and appeals on our website at: www.gov.uk or you can download a copy of the ‘Factsheet HMRC1: HM Revenue and Customs decisions - what to do if you disagree’ The Factsheet can also be requested from the HMRC Excise Helpline.
26. Completion of duty returns: examples and comments
The Brewers Arms (a tenanted pub - John Smith is the tenant)
The pub has 2 Category C gaming machines and 1 SWP machine. The total net takings from all machines are liable to the standard rate of MGD. The machines are owned by ABC Machine Suppliers Ltd and the income is split 50:50 after tax.
John’s machines are cashed up every week by Jim who works for ABC. Jim gives John his share of the takings and the amount of MGD due on all the net takings, and an invoice. The invoice shows the takings for the week and the MGD due since the machines were last emptied.
The invoice also shows the meter readings for the machine and any adjustments to the float.
John is responsible for paying the MGD and will need to complete and send HMRC his return and payment at the appropriate time (that is, the return is received and the payment cleared within 30 days of the end of the accounting or return period).
When calculating the MGD due for the accounting period, John adds together all the MGD on all the invoices which fall into the period. If an invoice covers a week which spans 2 different accounting periods he must apportion the takings fairly between the 2 accounting periods.
Important note: almost all businesses will only use machines which make a profit over the return period. A return or accounting period is the period shown on your MGD Return. These businesses can simply enter ‘0’ in boxes 10 and 11.
|1||Number of machines available for play at the end of the return period||3||John has three machines. Enter ‘3’ in box 1.|
|2||Total net takings liable to the higher rate||0||John has no machines which are liable to the higher rate. Box 2 is nil, so John enters ‘0’ in the box.|
|3||Total MGD due at the higher rate of duty||0||John doesn’t have any machines liable to the higher rate. Box 2 is nil, so John enters ‘0’ in the box 3.|
|4||Total net takings liable to the standard rate of duty||£1,265.87||John enters the amount of the takings for the return period in box 4|
|5||Total MGD due at the standard rate of duty||£253.17||John multiplies the amount in box 4 by 20% (the standard rate of duty). The result is £253.17 (rounded to the nearest penny) which John enters in box 5. John also checks this by adding together all the amounts of MGD shown on ABC’s invoices. The 2 figures are the same.|
|6||Total net takings liable to the lower rate of duty||0||John has no machines which are liable to the lower rate, so he enters ‘0’ in the box.|
|7||Total MGD due at the lower rate of duty||0||John doesn’t have any machines liable to the lower rate. Box 6 is nil, so John enters ‘0’ in box 7.|
|8||Duty payable before any adjustments||£253.17||This is box 5 added to box 7, but since box 7 is ‘0’ it’s just the amount in box 5.|
|9||Any under declared duty from previous MGD periods||0||If John realises that he has made a mistake on an earlier return and he has underpaid duty, he can enter the amount here, though limits apply (see paragraph 15.1). If it is less than £10,000 it can always be entered here. John is not aware of any errors in previous return periods so he enters ‘0’.|
|10||Enter the box 11 amount from your previous return||0||John writes ‘0’ in this box. His machines have never made a loss over a return period.|
|11||Enter any negative amount of duty to carry forward||0||John writes ‘0’ in this box. His machines have never made a loss over a return period.|
|12||Total net duty payable on this return||£253.17||This is the total of box 8 plus anything in box 9. John has nothing in box 9 so he enters the box 8 amount into box 12. This is the duty which John must pay for this return period.|
A FEC - Sea Side Amusements (SSA) run by Derek Smith.
SSA has 100 machines. 70 of these are redemption machines and only non-cash prizes can be won. This means all the supplies from these machines remain liable to VAT and can be ignored for the purposes of MGD.
20 machines are low stake and prize machines which are liable to the lower rate of MGD and 10 machines are liable to the standard rate.
Derek cashes up the machines every week. He will record the weekly net takings from machines liable to each rate of MGD separately.
Most businesses will only use machines which make a profit over a return period. A return or accounting period is the period shown on you MGD Return.
|1||Number of machines available for play at the end of the return period||30||Derek has 30 machines which are liable to MGD.|
|2||Total net takings liable to the higher rate of duty||0||Derek has no machines which are liable to the higher rate, so he enters ‘0’ in the box 2|
|3||Total MGD due at the higher rate of duty||0||Derek doesn’t have any machines liable to the higher rate. Box 2 is nil, so Derek enters ‘0’ in box 3.|
|4||Total net takings liable to the standard rate of duty||£3,150.67||Derek’s machines are cashed up every week by himself or one of the senior staff. Each week’s takings are recorded in a takings record. Derek adds up the net takings for all the times that the machines are cashed up in the period. He also adjusts for the days either side of when the machines were cashed up at the start and end of the return period. The total takings for machines liable to the standard rate are £3,150.67. Derek enters £3,150.67 in box 4.|
|5||Total MGD due at the standard rate of duty||£630.13||Derek multiplies the amount in box 4 by 20%, (the standard rate of duty). The result is £630.13 (rounded to the nearest penny) which Derek enters in box 5.|
|6||Total net takings liable to the lower rate of duty||£5,835.39||Derek’s machines are cashed up every week by himself or one of the senior staff. He does this in the same way and at the same time as the standard rate net takings in box 4 above. The total net takings for machines liable to the lower rate are £5,835.39. Derek enters £5,835.39 in box 6.|
|7||Total MGD due at the lower rate of duty||£291.77||Derek multiplies the amount in box 6 by 5%, the lower rate of duty. The result is £291.77 (rounded to the nearest penny) which Derek enters in box 7.|
|8||Duty payable before any adjustments||£921.90||This is box 5 added to box 7. The result is £921.90 which Derek enters in box 8.|
|9||Any under declared duty from previous MGD periods||0||If Derek realises that he has made a mistake on an earlier return and he has underpaid duty, he can enter the amount here, though limits apply (see paragraph 15.1). If it is less than £10,000 it can always be adjusted here. Derek is not aware of any errors in previous return periods so he enters ‘0’.|
|10||Enter the box 11 amount from your previous return||0||Derek writes ‘0’ in this box. His machines have never made a loss over a return period.|
|11||Enter any negative amount of duty to carry forward||0||Derek writes ‘0’ in this box because his machines have never made a loss over a return period.|
|12||Total net duty payable on this return||£921.90||This is the total of box 8 plus anything in box 9. Derek has nothing in box 8, so he enters the amount in box 9 into box 12. This is the duty which Derek must pay for this return period.|
ABC Ltd - national chain of bookmakers.
The tills in the betting offices and the fixed odds betting terminals are linked by computer to ABC’s head office. The head office can see the amounts paid to play each game and the amount of winnings paid out for each game and the net takings for each machine, and is able to see which individual games are the most popular. This information helps the business to control the business income, and it also helps them to decide which new games will be popular.
The head office keeps records of the daily totals from machines which show the takings separately for every office. These records are analysed for trends.
ABC has monthly management accounting periods and these end on the last Sunday of every month. HMRC has granted ABC special MGD accounting or return periods which coincide with these dates and which 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.
|1||Number of machines available for play at the end of the return period||200||ABC has 200 machines which are liable to MGD.|
|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 return period and no adjustments to the figures are needed.|
|3||Total MGD 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||ABC has no machines which are liable to the standard rate, so the company accountant enters ‘0’ in the box.|
|5||Total MGD due at the standard rate of duty||0||ABC does not have any machines which are liable to the standard rate. Box 4 is nil, so the conpany accountant enters ‘0’ in box 5.|
|6||Total net takings liable to the lower rate of duty||0||ABC has no machines which are liable to the lower rate, so the company accountant enters ‘0’ in the box|
|7||Total MGD due at the lower rate of duty||0||ABC doesn’t have any 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.|
|9||Any under-declared duty from previous MGD 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||ABC’s machines never make a loss over a return period so enter ‘0’.|
|11||Enter any negative amount of duty to carry forward to the next return||0||ABC’s machines never make a loss over a return period so 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.|
This example shows how to complete your MGD return correctly where your machines have paid out more in winnings than were due in stakes over an accounting period.
When might this happen
It is not expected to happen very often. It might happen where a business installs a new type of machine which can pay out a jackpot before that amount has been taken in stakes. If such a machine is installed towards the end of a return period and the operator has only a very few machines it is a possible outcome but very unlikely.
HMRC may scrutinise any MGD return involving losses carefully because it is expected to be only a very rare event and there is the possibility that an operator has made a mistake completing the return.
HMRC will not make a repayment of duty in such a situation, but operators are permitted to carry any negative duty forward to offset against future profits (shown in box 11). This is then entered into box 10 of the following return.
|1||Number of machines available for play at the end of the return 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 MGD 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.||M|
|5||Total MGD 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.||M|
|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 MGD 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 minus box 7. The result is a minus amount, so a ‘M’ is written in the adjacent box on the right.||M|
|9||Any under declared duty from previous MGD 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 to carry forward||£175||HMRC will not make a repayment of MGD, but will allow businesses in this situation to offset amounts against liability in future return periods. The loss of £175 MGD is entered in box 11 to carry forward to the next return period.||M|
|12||Total net duty payable on this return||0||There is no MGD to pay on this return.|
- ‘M’ entered in this column indicates a negative figure.
When the next return is due, any MGD payable can be reduced by the £175 negative MGD from this return.
This example shows how to carry forward a negative amount from the previous accounting period.
|1||Number of machines available for play at the end of the return 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 MGD 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 MGD 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 MGD 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 box 7.|
|9||Any under declared duty from previous MGD 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||M|
|11||Enter any negative amount of duty 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.|
|Accounting period or Return period||A period of time for which taxpayers must calculate and notify the tax due. For MGD it is normally a period of three calendar months. If HMRC have agreed to non-standard accounting periods it will normally be a period of approximately three months.|
|Agent||A person who has authority and consents to act on behalf of a registered or registrable person. Typically an accountant or tax adviser.|
|AMLD||Amusement Machine Licence Duty.|
|Bacs||Bankers Automated Clearing System.|
|CHAPS||Clearing House Automated Payment System.|
|Duty Return||A declaration which must be completed to tell HMRC how much MGD is due in each accounting period.|
|Electronic returns||The duty return used for HMRC Online Services. See paragraph 14.1.1.|
|Forfeiture||See ‘seizure’ below and paragraph 22.3.1.|
|GA 05||Gambling Act 2005.|
|‘Go live’ date||The commencement date for MGD: 1 February 2013.|
|GRM||Group Representative Member.|
|Group||A group of corporate bodies that apply for a single Group registration to simplify MGD administration. See section 8.|
|HMRC||HM Revenue and Customs.|
|MGD||Machine Games Duty.|
|NSAP||Non-Standard Accounting Periods - see paragraph 12.4.|
|NRU||HMRC, Excise Processing Teams, BX9 1GL. This office handles all registrations and changes.|
|Online services||HMRC provide an online service for registration and submitting returns. See details at paragraph 6.6.|
|Prescribed Electronic Method||Electronic system that allows people to register for MGD, to make returns and to interact with HMRC through online services. See paragraph 18.1.1.|
|RP||Registered Person - see paragraph 5.1.|
|Registrable person||Any person that is required to register for MGD. See list at paragraph 6.2.|
|Return period||Same as accounting period - see above.|
|SWP||Skill With Prize.|
|UK Tax Representative||A UK person who is responsible for an overseas’ responsible person’s UK MGD tax affairs. See paragraph 19.1.1.|
Your rights and obligations
Read Your Charter to find out what you can expect from HMRC and what we expect from you.