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Letters have been issued by HM Revenue & Customs (HMRC) demanding that thousands of publicans repay money that was given to them by the organisation, following a ruling that VAT shouldn’t be charged on income from slot machines.

Other outlets with slot machines will be receiving the letters, including bowling alleys, cafés and amusement arcades. Thousands of pounds could be owed in VAT payments. Originally, HMRC and Rank Group, a casino operator, fought it out in court to determine whether or not VAT should be charged on slot machine income. Rank Group won the case, with the Tribunal settling in its favour. HMRC then went ahead and issued VAT repayments worth around £30 million to the group and also other operators that had paid VAT on the income.

HMRC appealed the Tribunal decision and won its case, going ahead and writing out to ask for the VAT repayments to be returned to HMRC.

According to one publican, the demands for repayment could result in financial difficulties, as many have an income of less than £15,000 per annum. The publican added that although some had been made bankrupt, they were still being pursued for the amount owing. Some of the pub companies assisted publicans when they applied to HMRC for refunds, with many receiving half as part of the license terms.

A spokesperson for Punch Taverns said:

“We know how difficult this has been for our tenants and we are doing everything we can to help. We are immediately returning our share of the rebate, with interest on the full sum, to affected parties and we are offering as much advice and support as we can.”

As Rank Group is reportedly appealing the decision, publicans may be receiving VAT refunds once more.

Machine Games Duty

Introduced to replace the VAT and Amusement Machine Licence Duty that was previously in place, Machine Games Duty is charged when a customer wins an amount of cash on a machine that is greater than the cost to play. If a machine offers a non-cash prize, or the winnings are less than the cost of playing, the tax won’t be charged.

Rates of MGD

If the cost to play a game is 20 pence or below and the cash prize is less than £10, the rate of MGD is five per cent. For all other machines liable to MGD, the rate is 20 per cent.

Calculating the amount of MGD can be a complex process, especially if you have a pub to run! If you would like advice on this subject, please contact us here at The Accountancy Partnership.

About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

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