MGD stands for Machine Games Duty. It is a tax that came into force on 1st February 2013 and replaced the Amusement Machine Licence Duty and the payment of output tax on machine income.
How is it Calculated?
MGD is calculated on the gross takings of the machine at different rates. The three current rates are:
|Machine Type||Cost to play||Prize||Rate you pay|
|Type 1 – lower rate||20 pence or less||£10 or less||5%|
|Type 2 – standard rate||21 pence to £5||£11 or more||20%|
|All others – higher rate||More than £5||Any||25%|
If the machine has more than one type of game, the rate is calculated based on the highest rated game on all takings from the machine. So for example, if a quiz machine has 20+ games, with some that cost 10p to play, and one that costs £6 to play. Then the MGD will be calculated at 25% of the total takings.
Who is liable for this tax?
Usually, the person responsible for registering and paying is the person who holds the licence, for example, a premises licence, etc. However, there are specific rules for tenants of pubs. Unfortunately, the duty of registration and payment falls to the tenant of the pub.
Does this mean that I am paying the MGD?
No, machine operators calculate the profits and how they are split after the MGD has been taken out of the equation. The MGD to pay is then left on site on top of what the tenants share is. There is also the possibility of being able to claim back VAT on the rent etc. of the machine on your VAT returns. However, you will have to speak with whoever processes your VAT returns, as they will need to look into the De Minimis rulings to see if you can.
If you are a client of ours who we process MGD for and are curious as to the split of MGD, VAT and your net income on the machine, send your accounts team member an email asking about it, and they will be happy to let you know!