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Club Law and Management

by Philip Smith, Secretary of the A.C.C.

Machine Games Duty

On the 1st February 2013 VAT will no longer be applicable to the profits of Gaming Machines and Amusement Machine Licence Duty (AMLD) will be scrapped completely. Replacing them both will be Machine Games Duty (MGD) which will be imposed on the profits of Gaming Machines and will be calculated on a pay as you go basis. There will no longer be an upfront fee in order to have a Gaming Machine on the Club’s premises; the only taxation will be on the profits of the Gaming Machine by way of MGD.

It is important for Clubs to be aware that MGD is not applicable to B3A Gaming Machines. B3A machines will continue to be exempt from all taxation and as such will remain popular with Clubs. The exclusion of B3A machines from MGD is an important victory for Clubs. As expected, Pull Tab Lottery Machines continue to be exempt from taxation.

MGD will be set at 20% which Machine Games Duty is lower than many industry commentators expected and coupled with the eliminating of AMLD is not expected to have a detrimental impact on the Club’s Gaming Machine Revenue and for some Clubs it may even have a beneficial impact due to the eliminating of AMLD as a standing flat fee. MGD was designed by the Treasury to be ‘revenue neutral’ which means it is not expected to raise more for the Treasury than the present situation of AMLD + VAT.

MGD is due on the total net taking of Gaming Machine. Net takings are gross takings less winnings. Whilst MGD and VAT appear to be set at the same rate, there is an important difference. MGD is calculated in addition to the net takings whereas VAT is calculated as included in the net takings. If net takings after prizes from the machine are £240 then MGD at 20% is £48 whereas under VAT the inclusive figure would be £40.

Questions and Answers

Q. Is there a time frame in which we have to register for MGD?

A. Yes, if the Club is due to be liable for MGD then you must register by the 31st December 2012. You can choose to register online or you can print off a paper registration form from the internet. If you do not have internet access then your machine supplier should be able to provide you with a paper registration form. If you have any problems obtaining a paper registration form then please contact Dransfields, the ACC’s recommended gaming machine supplier, who are happy to assist all ACC Clubs regardless of whether the Club is a customer of Dransfields.


Q. How is MGD to be paid once it is up and running?

A. If you have registered online then MGD should be paid online. If you have registered via post then you can submit paper returns. It is unknown how easy it will be to switch methods so we would suggest that Club’s decide which way they wish to pay MGD and register accordingly. If the Club’s Accountant is to be responsible for submitting MGD returns then you may also wish to consult with them before making this decision.


Q. We currently operate on a revenue share basis with our supplier, who will be liable to pay the MGD?

A. This will depend on the nature of the profit share. It will usually be the Club that will be liable to register and pay MGD. This will be a change if it is currently the supplier that pays for the AMLD licence.


Q. If we are liable to pay the MGD but we operate on a revenue share basis how will we reclaim our supplier’s share of the MGD?

A. Arrangements will differ from supplier to supplier, we are aware that Dransfields will calculate their share after deduction of the applicable MGD when they empty the Gaming Machine.

Q. We rely on our accountant to make our VAT returns online. Can we align our MGD returns with our VAT return periods?

A.Clubs will be able to request that the periods are aligned and HMRC will accommodate such requests as far as possible.


Q. We only have two gaming machines as it was too expensive to have a third due to the extra AMLD license. With the elimination of AMLD is there any downside to having our maximum allocation of three gaming machines?

 A. There will be no downside to having the Club’s maximum allocation of three Gaming Machines although the Committee should still be aware that only one can be a B3A machine. We therefore expect most Clubs will decide to have one B3A machine and two B4 machines as there will be no extra expense incurred by the extra machine(s) – and it is likely to improve the total overall revenue collected. We are aware that Dransfields will be contacting Clubs that they currently supply to discuss the installation of additional machines on a profit share basis, if so desired by the Club.

Q. We rent our Gaming Machines; will we continue to recover VAT on the Gaming Machines charges on these machines following the introduction of MGD?

 A. Input VAT related to exempt supplies (such as the VAT on hire charges for gaming machines post 31st January 2013) cannot normally be recovered. However, special de minimis rules do allow the recovery of input VAT relating to exempt supplies providing certain limits are not exceeded: •Input tax relating to an exempt supply must not exceed £7,500 per annum or £1,875 per quarter and cannot be more than 50% of all input tax incurred in that period. If either parameter is exceeded then the ‘exempt’ input tax cannot be recovered
•The club must take into account non attributable input tax (e.g. book keeping fees) where a proportion of the VAT incurred is attributed to exempt activities/income and a proportion to standard rated activities/income •The club must ensure that all input tax on exempt supplies is less than £1,875 per quarter
•If the de minimis limits are exceeded then none of the input tax relating to an exempt supply can be reclaimed by the club The above is necessarily only a brief explanation and is for general guidance. VAT Notice 706 (Partial Exemption) explains the full rules, procedures and tests to be satisfied for recovery of Input VAT.


National Minimum Wage

On the 1st October 2012, the National Minimum Wage was increased for all workers aged 21 and over from the current level of £6.08 to the new level of £6.19. The Minimum Wage rates for workers aged 18-20 (£4.98) and 16-17 (£3.68) remained unchanged. We advise all Clubs to make sure that contracts are up to date and reflect the new rate where appropriate.