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Fancy A Flutter? Don’t Bet On It…

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Fancy A Flutter? Don’t Bet On It…

October 21
20:07 2013
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Publicans and bar managers have for many years been topping up their revenues by hiring gaming machines to provide punters with alternative forms of entertainment – other than eating and drinking – whilst on their premises. However, as part of its commitment to raising tax revenues, the British Government has proposed the introduction of a new Machine Games Duty which, if approved, could have significant financial consequences for operators. 

By definition, a ‘machine game’ is an electronic gaming device into which customers insert money in the hope of winning a prize that is greater than the cost of play. The current tax system for games machines is split between Amusement Machine Licence Duty (AMLD) and VAT, and the intention is that a new Machine Games Duty (MGD), where payable, will replace both of these taxes. Until recently, electronic ‘quiz’ games such as Who Wants To Be A Millionaire? were considered by many trade organisations and commentators to be outside the scope of AMLD, as participants relied on their own skill or knowledge – rather than mere luck or chance – to win cash prizes. Consequently, players were not considered to be ‘gambling’ in the traditional sense, unlike on regular betting machines which are subject AMLD and where the odds of winning are dependent on several other factors. HMRC, meanwhile, is now arguing that Machine Games Duty would apply to all machine games where the value of the prize exceeds the lowest charge payable for playing the game. Under the new proposals currently being considered, there will be two rates of tax and these skills-and-knowledge quiz machines are set to be charged at the higher rate. So, whether that prize is won using skill, knowledge or mere luck will no longer be relevant under the new rules, and the tax authorities claim this would eradicate any dubiety about whether or not tax should be applied to a specific type of machine. However, despite apparently simplifying the system, the proposed new levy has provoked an outcry of protest from some operators, many of whom feel it is unfair to tar all machines with the same fiscal brush. And, as well as questions of how expensive and complex the new scheme will be to operate, concerns are growing over potential lost revenues for some operators. Indeed, such gaming devices generate a substantial portion of their revenue and are a popular form of entertainment for many customers, not all of whom are there to drink. And, on top of all this, there are also fears that the tax will have a three-year retrospective effect, which could mean that pubs running these machines would face an additional tax bill potentially running into thousands of pounds. As things currently stand, the British Beer and Pub Association has expressed its views on the matter, and are calling upon HMRC to rethink their proposals. Whether or not the latter will listen is up for debate, but given its recent efforts to replenish the country’s coffers, many in the UK’s pub and bar sector wouldn’t bet on a favourable outcome for the industry.

www.todsmurray.com

This article has been edited from its original version. For the complete feature, please see Catering in Scotland magazine February/March 2012.

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Naomi Pryde outlines the Machine Games Duty and highlights how it could affect your business…

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Catering Scotland

Catering Scotland

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