UK Considers Gross Profit Tax For Gaming Machines

by Robert Lee, Tax-News.com, London

21 July 2009

The UK government is considering bringing the basis of taxation of gaming machines to into line with other gambling regimes with the introduction of a gross profits tax.

Under current tax law, gaming machines face a combination of amusement machine licence duty, a fixed cost licence fee paid before a gaming machine may be made available to play, and value-added tax at the standard rate, currently 15%, on their takings.

However, the government considers that taxing on the basis of gross profits has been a success in other areas of the gambling industry and the Treasury has issued a consultation to gather views on extending this to gaming machines.

"With around 190,000 gaming machines subject to duty and an estimated 260,000 machines overall, as well as new limits on the maximum stake and prizes for some machines recently introduced, it is essential that the tax regime for gaming machines remains modern and fit for purpose,” Sarah McCarthy-Fry, Exchequer Secretary to the Treasury, writes in the consultation document.

“The current duty regime applicable for gaming machines is simple in principle and has worked well up to now. However it is out-dated and relatively ill equipped to deal with regulatory changes and technological innovation in the gaming machines sector,” she goes on to note.

The Treasury believes that there is scope for improving the “efficiency, fairness and sustainability” of the gaming machines tax regime, while the proposed reforms may also “significantly reduce” the administrative burdens associated with compliance for operators.

Over the past few years the gambling industry in the UK has undergone a period of significant change. The Gambling Act 2005, implemented in 2007, has changed the regulatory environment affecting all gambling firms.

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