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Finance Act 2012

Part 3 VAT Exemption

64.Paragraph 63 substitutes a new section 23 and inserts an additional section 23A into the Value Added Tax Act 1994 (VATA).  The new section 23 provides a mechanism for valuing supplies involving relevant machine games, which are defined in section 23A.

65.New Section 23(1) and (2) provide that the amount a person pays to play a relevant machine game is treated as the consideration for a supply of services.

66.Section 23(3), (4) and (5) provide that the value of such supplies is the takings received, less the amount of the winnings paid out, excluding any winnings paid to the supplier or a person acting on their behalf.

67.Section 23(6), (7), (8) and (9) provide for the valuation of tokens inserted into a machine to play a relevant machine game or provided by way of winnings from such a game.  Games played solely for prizes consisting of the opportunity to play the game again are not relevant machine games.  However a token that enables the machine to be played again may be one of a number of prizes offered by a relevant machine game.  Where that is the case, the value of the token is deducted in calculating the value of the relevant supply.

68.Section 23(10) provides that if it is not reasonably practicable for takings and winnings to be attributed to relevant machine games, or apportioned between relevant machine games and other games, the attribution or apportionment is to be carried out on a just and reasonable basis.

69.New Section 23A(1) and (2) define a relevant machine game as a game played on a machine for a prize, unless it is liable to, or is excluded from, specified gambling duties.  Relevant machine games may be games of skill, games of chance, or games that involve elements of both skill and chance.

70.Section 23A(3) includes relevant definitions.  A “prize” does not include the opportunity to play the game again.

71.Paragraph 64 amends Group 4 (betting, gaming and lotteries) in Part 2 of Schedule 9 (exemptions) to VATA.

72.Paragraph 64 (2) inserts item 1A, which exempts the provision of facilities for playing dutiable machine games from VAT, but only insofar as the takings and payouts from those games are taken into account in determining the charge to MGD.  Dutiable machine games may be games of skill, games of chance, or games that involve elements of both skill and chance.

73.Paragraph 64(3) removes Note (1)(d), which excludes gaming machines from exemption under item 1 (exemption of the supply of facilities for placing bets or for playing games of chance for a prize).  The introduction of MGD means that it is necessary for the exclusion from item 1 to be framed in different terms.

74.Paragraph 64 (4) inserts Note (1A) which excludes the provision of facilities from item 1 to the extent that those facilities are used to play a relevant machine game.

75.The amendments to Group 4 mean that the provision of facilities for playing games of chance which are not relevant machine games will be exempt from VAT under item 1.  The provision of facilities for playing dutiable machine games will be exempt from VAT under item 1A, insofar as the takings and payouts from those games are taken into account in determining the charge to MGD.  Other machine games will not be exempt from VAT under Group 4.

76.Paragraph 65 amends paragraph 9 (power to require opening of gaming machines) of Schedule 11 (administration, collection and enforcement) to VATA by substituting a new paragraph (a) which entitles an authorised person to require that a machine on which relevant machine games are capable of being played be opened.

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