Legislation will be introduced in Finance Bill 2012 to establish Machine Games Duty and, where the new Machines Games Duty is applicable, this will replace both Amusement Machine Licence Duty and VAT.

Baker Tilly analysis

Although already identified in the Budget 2011, it is somewhat ironic that the Draft Finance Bill confirms the introduction of Machine Games Duty on the same day that HMRC announces that it will continue to appeal the repayment of VAT on gaming machine income following the European Court of Justice decision in Rank.

In detail

The VAT treatment of gaming machines has been challenged through the Tribunal system with the European Court of Justice providing guidance for the domestic courts to determine if the VAT treatment of gaming machines by HM Revenue & Customs infringed the principle of fiscal neutrality.

The introduction of a Machine Games Duty is therefore to protect tax revenues in the future. By exempting dutiable machine games from VAT ensures that operators make a fair contribution to tax receipts.

Machine Game Duty will be applicable from 1 February 2013 and, in view of quarterly duty returns and subsequent VAT exemption have an impact on business compliance costs and VAT recovery.