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HMRC internal manual

VAT Betting and Gaming Guidance

Machine game": treatment of tokens and prizes awarded from machines: potential areas of incorrect VAT treatment of tokens

The correct VAT treatment of tokens is a difficult area. There are several reasons for this:

  • Some small-scale providers of machine games may prove unable or unwilling to accept that tokens can have any recognisable value. Their accounting systems may therefore disregard tokens completely.
  • Some traders that operate one or more amusement arcades use tokens in their machines that have been specifically manufactured for their own sites. This leads to the claim that there is no requirement to take tokens into account for VAT purposes because, upon a site-by-site basis, there can never be any net token gain (irrespective of the gain or loss situation of individual machines).
  • Some traders may operate complicated token-flow systems in which no proper records are maintained of new tokens entering circulation or within which tokens may be exchanged for cash takings or vice-versa. The combination of complexity and inadequate control can result in accidental error or deliberate abuse.

These areas of difficulty are discussed in VBANDG13450, VBANDG13500, , VBANDG13650 and VBANDG13700. The illustrations discussed deal specifically with replayable tokens

  • because non-replayable tokens are only encountered infrequently, and
  • because they are non-replayable and therefore do not lend themselves to becoming part of any circulation system between machines and sites.