BN 62 - Gaming Machines and Amusement Machine Licence Duty (AMLD)

Who is likely to be affected?

Will affect anybody who provides a licensable machine for play in the UK. In particular, the change to the definition of a gaming machine will affect bookmakers who provide fixed odds betting terminals (FOBTs) for play and operators of machines provided under section 16 of the Lotteries and Amusements Act 1976 or section 21 of the Gaming Act 1968 (section 16/21 machines or 16/21s).

General description of the measure

More closely aligns excise and VAT definitions of a gaming machine with the Gambling Act 2005 and removes any amusement machine that is not a gaming machine (e.g video or pinball machine) from the scope of AMLD. In addition, there is a minor revision to the definition of an excepted gaming machine to align with the Gambling Act categories.
Aligns the AMLD machine categories with those provided by the Gambling Act 2005 and sets new duty rates.

Operative date

All of the above changes will have effect for any licences commencing on or after 1 August 2006. There is one important exception detailed by paragraph 8 below.

Current law and proposed revisions

Definition of a Gaming Machine (FOBTs and 16/21s)

On 6 December 2005, the definition of a gaming machine in Group 4 of Schedule 9 to the Value Added Tax (VAT) Act 1994 was amended by Treasury Order. In consequence, it is necessary to amend section 23 of the VAT Act 1994, which determines the amount on which VAT is calculated, in Finance Bill 2006. The section 23 definition will be amended with retrospective effect from 6 December 2005.
The 6 December 2005 changes imposed a clear liability to VAT on the receipts from FOBTs and 16/21s. Since then general betting duty has not been collected on FOBT receipts, and section 16/21 machines have remained entitled to be licensed as non-gaming machines (category A AMLD). Until 1 August 2006 there will be no additional changes to the tax treatment of FOBTs and 16/21s.
With effect from 1 August 2006 the definition of a gaming machine contained in section 25 of Betting and Gaming Duties Act 1981 (BGDA) will be amended (in line with the VAT and Gambling Act 2005 definitions) so that FOBTs and 16/21s are brought within the scope of AMLD and will need to be covered by the appropriate licence. At the same time, further changes to BGDA will remove FOBTs from any charge to general betting duty. This will formalise the tax treatment they received from 6 December 2005.
For the elimination of doubt, if a licence were to be taken out for either a section 16/21 or a FOBT from 6 December 2005 until 31 July 2006, for a category other than a gaming machine, that licence will not be valid in relation to those machines after 31 July 2006. From 1 August 2006 a licence authorising the appropriate category of gaming machine (defined by stake and prize) will be required for any premises where FOBTs and 16/21s are available for play. The new rates and machine categories are explained at paragraphs 11 to 14.

Scope of AMLD

From 1 August 2006 an amusement machine that is not a gaming machine (e.g video or pinball machine) will be removed from the scope of AMLD. Prior to 1 August amusement machines that are not gaming machines, and which have a total cost per play in excess of 50p, remain liable to category A AMLD.
10. Section 21 of BGDA currently exempts 2-penny gaming machines and gaming machines with a maximum stake of 10p and a maximum prize of £8. From 1 August 2006 the scope of this exemption will be revised:

The 2-penny machines will remain exempt.
Machines with a maximum stake of 10p and maximum cash prize of £5 will be exempt.
Machines with a maximum stake of 30p and maximum prize of £8, where the cash element of the prize does not exceed £5 will be exempt.

New categories

The current categories of machines, and rates of duty, for AMLD are described in section 23(3) of BGDA. This structure will be replaced by the following six categories of machine (that mirror those provided by the Gambling Act 2005)

A - A gaming machine that does not fall into any other category.
B1 - A gaming machine where the amount required to play the game once does not exceed £2, and the value of the prize that may be won in any one game does not exceed £4,000 in money or as a non-monetary prize.
B2 - A gaming machine where the amount required to play the game once does not exceed £100, and the value of the prize that may be won in any one game does not exceed £500 in money or as a non-monetary prize.
B3 - A gaming machine where the amount required to play the game once does not exceed £1, and the value of the prize that may be won in any one game does not exceed £500 in money or as a non-monetary prize.
B4 - A gaming machine where the amount required to play the game once does not exceed £1, and the value of the prize that may be won in any one game does not exceed £250 in money or as a non-monetary prize.
C - A gaming machine where the amount required to play the game once does not exceed 5p
and
A gaming machine where the amount required to play the game once does not exceed 50p, and the value of the prize that may be won in any one game
does not exceed £25 in money or as a non-monetary prize.

Machine operators will need to check which new AMLD category their machines will fall into, but the following is an indicative guide of how new AMLD categories map across to existing AMLD categories:

New category	Relationship to existing AMLD category
A	None. This is intended for new unlimited stake and prize machines that will be allowed in the regional casino, but like the current top category of AMLD, it has been defined for anti-avoidance purposes to capture any gaming machine not falling into any other category
B1	Some current Cat E machines in casinos
B2	Some current Cat E machines in casinos plus bookmakers’ FOBTs not currently subject to AMLD. This will also include some 16/21 machines.
B3	Some current category E machines in casinos and bingo clubs. This category will also include some 16/21 machines.
B4	Some current category E machines in casino, bingo halls and registered clubs, plus category D machines in registered clubs.
C	Current category C and B machines found in a variety of locations.

The table in section 23 of BGDA, setting out rates of duty, will be replaced by the table below:

Period (in months) for which licence granted	Category A £	Category B1 £	Category B2 £	Category B3 £	Category B4 £	Category C £
1	435	220	170	170	155	65
2	875	435	345	345	310	130
3	1310	655	515	515	465	195
4	1750	875	690	690	625	255
5	2185	1095	860	860	780	320
6	2625	1310	1030	1030	935	385
7	3060	1530	1205	1205	1090	450
8	3500	1750	1375	1375	1245	515
9	3935	1970	1545	1545	1400	580
10	4375	2185	1720	1720	1555	645
11	4810	2405	1890	1890	1715	705
12	5000	2500	1965	1965	1780	735

In comparison to the old rates, the new rates will:

Increase AMLD in line with inflation;
Set new higher rates for category A and B1 to reflect their higher stakes and prizes;
Set a new rate for category B4;
Make short period licences more affordable.

Other Measures

As part of the overall Budget package for gaming machines it was announced that changes would be introduced later this year to simplify some aspects of the administration of AMLD.

Summary

Machine Type	6th Dec 05 – 31st Jul 06	Post 31st Jul 06
FOBT	VAT	VAT + AMLD as a category B2 gaming machine (under the new structure).
16/21	VAT + current category A AMLD	VAT + AMLD as a gaming machine (category under new structure will be either B2 or B3 depending on the size of stake and prize)
Non-gaming amusement machine	VAT + current category A AMLD, if stake in excess of 50p	VAT
AMLD exempt gaming machine (scope of exemption changes on 1st August. Status quo broadly maintained)	VAT	VAT
All other gaming machines	VAT + AMLD (current categories and rates)	VAT + AMLD (new categories and rates)

Further advice

If you have any questions about this change, please contact HMRC National Advice Service on 0845 010 9000.