The UK's HM Revenue and Customs (HMRC) has warned that certain gaming machines being marketed as "electronic lottery terminals" are not exempt from value-added tax (VAT) and Amusement Machine License Duty (AMLD), as is currently being claimed by some manufacturers.
Under current UK tax law, granting someone the right to take part in a lottery is exempt from VAT. This exemption covers the sale of lottery tickets to the public. Most lotteries, except the National Lottery, are also exempt from lottery duty. By contrast, gaming machine income is standard-rated for VAT purposes, and depending on stake and prize limits, gaming machines are liable to AMLD.
However, according to an HMRC brief issued on November 18, the department stated that it has become aware that certain gaming machines are being wrongly marketed as lottery terminals.
"The manufacturers argue that the product constitutes a lottery that is exempt from VAT and lottery duty, and outside the scope of AMLD," the brief states. "HMRC does not accept this as these ‘electronic lottery terminals’ are completely different from the lottery ticket dispensers or vending machines typically found in members’ clubs."
HMRC is urging any operator that has received income from an "electronic lottery terminal" to account for VAT and ensure that they hold an AMLD licence if such lottery terminals are used by the public on any premises.
Under-declarations of output tax can be corrected by adjusting a current VAT return, providing that the net value of errors found on previous returns does not exceed GBP10,000; or the net value of errors found on previous returns is between GBP10,000 and GBP50,000 but does not exceed 1% of the net outputs VAT Return declaration due for the return period in which the errors are discovered.
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