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HMRC internal manual

Compliance Handbook

HM Revenue & Customs
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Penalties for Failure to Pay on Time: Rules for specific taxes: Machine Games Duty (MGD): Penalties: Failure to pay all or part of amounts due - overview

If a person fails to make full payment of MGD by the due date, they become liable to a penalty on the unpaid amount.

The total penalties for an accounting period consist of

  • a default penalty for MGD unpaid at the penalty date, see CH155340, and
  • two further penalties for MGD unpaid at 6 and 12 months after the penalty date, see CH155350.

It is important to distinguish between

  • the due date - the date when the person needs to pay the MGD, see CH155310, and
  • the penalty date - the day after the due date and the first date on which a penalty is chargeable, also see CH155310.

Penalties are charged in relation to a due date for an accounting period. The first failure to pay MGD by the due date counts as a failure and starts the penalty period, but does not attract a default penalty. A penalty period starts on the penalty date and ends 12 months after the due date. A penalty period is extended if there are further failures to pay MGD by the due date. The penalty period ends 12 months after the due date for the person’s most recent failure.

The penalty regime is progressive, which means that continuing failures within a penalty period can give rise to an increased rate of default penalty.

To calculate the default penalty due for an accounting period follow these steps.

  • Take the number of failures in the penalty period. A failure is a failure to pay all of the MGD by the due date.
  • Use the number of failures to work out the number of defaults in the penalty period. A default is any failure to pay an amount of MGD in full by the due date, except the first such failure in the penalty period.
  • Use the number of defaults to determine the default penalty rate for the accounting period.
  • Apply the default penalty rate to the amount of MGD not paid by the due date, even if part or all of these amounts have been paid in the meantime.

To calculate the further penalties due for an accounting period you will need to know the amount of MGD still unpaid 6 months and 12 months after the penalty date. The rate of the further penalties is always 5% of the unpaid amount.