If you run a pub with fruit machines or quiz machines, Machine Games Duty (MGD) is part of the job. Get it wrong and you risk penalties. Get it right and it’s simply another routine compliance task.

Here’s what you need to know…

Key Takeaways

• Machine Games Duty (MGD) is a UK tax on net takings from dutiable machine games such as fruit machines and quiz machines with a cash prize. It replaced the old amusement machine licence duty system in 2013.
• You must register for MGD with HM Revenue and Customs before making gaming machines available to play on your premises. You may incur penalties if you do not register on time.
• Every accounting period (three months), you must file an MGD return within 30 days of the period ending, even if your takings are £0.
• You can file online or submit a paper return by printing the official HMRC PDF and posting it to HMRC Direct, BX5 5BD. Late or missing returns can lead to penalties and central assessments.

Machine Games Duty Explained

Machine Games Duty was introduced in 2013 in the UK as an excise duty on the play takings from dutiable gaming machines. It replaced the previous system based on a bookmaking office licence, bingo club licence, and amusement machine licence duty, simplifying how this tax applies to premises like pubs, social clubs, and arcades.

The key thing to understand: MGD is a payment based on how much money goes into the machines minus how much is paid out as prizes. Takings from machines subject to MGD are exempt from VAT, so you do not account for VAT on those machine takings as well as paying games duty.

For example, if you operate a leased pub with two Category C fruit machines, MGD sits alongside your existing business rates, income tax, and alcohol licence obligations. It is simply the specific duty payable on your machine games revenue.

A quick note on naming: do not confuse "machine games" (the UK tax term) with MachineGames, the Swedish video game studio best known for developing the modern Wolfenstein series. This guide is strictly about the UK tax.

Which Machines and Venues Are Caught by Machine Games Duty?

Knowing which machines fall within MGD saves you from either paying duty you don't owe or, worse, failing to pay duty you do owe.

MGD applies to gaming machines offering cash prizes where the prize value exceeds the cost to play. Common examples include pub fruit machines, quiz machines that pay out cash, and skill-with-prize machines. The tax applies across a range of venues:

• Tenanted and managed pubs
• Social clubs
• Amusement arcades and adult gaming centres
• Bowling alleys, service stations, and bingo halls

Some machines are exempt from games duty, including domestic machines used privately, certain low-stake machines where no prize exceeds the cost to play, machines at charity events where net proceeds are not for private gain, and tournaments or lotteries regulated separately. Internet or mobile games are outside this guide's scope.

Who Must Register for MGD and When?

HMRC looks to the person responsible for the premises, not the machine supplier, when it comes to MGD registration. In a typical UK pub, the tenant or operator must register and pay Machine Games Duty, even if the pub company or brewery owns the premises or the machines.

Machine suppliers and route operators are normally not the ones who register, even if they share the profits, unless they also operate the premises themselves. For unlicensed premises such as a café with a dutiable machine, the owner or manager is usually responsible.

Operators must register for MGD before machines are available to play. Register at least 14 days before use to give HMRC time to process the application. Factor this into any opening or refurbishment timeline.

How MGD Is Calculated on Machine Games

MGD is calculated on net takings from gaming machines. Net takings equal total staked minus prizes awarded, including non-cash prizes that can be deducted from MGD liability if they are cash-equivalent.

Three duty rates apply, depending on the machine type:

If a machine offers multiple gambling games and one triggers a higher rate, the highest applicable rate applies to all its net takings. Keep separate records for each machine type so you can calculate the correct amount of duty.

MGD rules and rates can change, so always check the latest HMRC guidance, including HMRC Excise Notice 452, or seek professional advice before relying on older figures.

MGD Registration: How to Get Set Up with HMRC

Before you can file returns or pay MGD, you need to complete registration. You can complete the registration online via your Government Gateway account or via form MGD1.

Have these details to hand:

• Legal entity (sole trader, partnership, or company)
• Trading name and address
• Main contact details
• Number and type of machines on the premises

Once processed, you receive an MGD registration number. Keep this safe, as you will need it on every return and piece of correspondence. HMRC will also add you to the MGD register.

If you are taking over an existing pub, the previous operator's registration does not transfer. Ensure their registration is cancelled and your own is active from the date you become responsible.

Filing MGD Returns: What Pubs Need to Do Every 3 Months

You must file MGD returns every three months. Returns must be submitted quarterly to HMRC, and MGD is charged quarterly based on machine profits. Operators must submit returns within 30 days after each accounting period ends.

Each return must provide details of your total net takings for the period, broken down by machine type, together with the resulting duty you owe. If there were no dutiable takings, you must still submit a nil return by entering 0 in all relevant boxes.

Keep supporting records showing how you arrived at your figures so that you can answer questions from HMRC or your accountant.

Online Filing, Paper Returns and Where to Send Them

HMRC encourages online filing via the Machine Games Duty return service. Log in, select the correct period, enter your figures, and submit.

If you prefer a paper return, the official MGD return form is available on GOV.UK as a PDF. Print, complete, and post it to:

HMRC Direct
BX5 5BD

Allow extra time for postal delays. The deadline remains 30 days after the end of the accounting period, whether you file online or by post.

Paying Machine Games Duty and Avoiding Penalties

Filing the return and making payment share the same deadline. You can pay MGD by:

• Online bank transfer
• Telephone bank transfer
• CHAPS
• BACS
• Direct Debit
• Online card payment

Payments at the Post Office are no longer accepted.

Some payment methods clear the same day, while others take several business days. Plan ahead.

Penalties can arise from failure to comply with MGD regulations. Specifically:

• Late or missing returns trigger fixed penalties that can escalate over time.
• Late payment attracts interest and additional charges.
• HMRC can issue central assessments for unpaid MGD based on estimated liabilities.
• Serious non-compliance may result in fines or legal action.

If you believe a penalty has been wrongly applied, contact HMRC to explain the circumstances. However, staying on top of deadlines is always the most cost-effective approach.

Stopping, Changing or Cancelling Your MGD Registration

When a tenancy ends or machines are permanently removed, you must notify HMRC. Follow the required process to cancel your MGD registration and file all outstanding returns up to the final date.

If you forget to cancel, HMRC may continue issuing return notices and payment demands. If your machines change, whether upgraded, removed, or replaced with different categories, review your duty position and update HMRC accordingly.

Keep copies of the final return and HMRC's acknowledgement of cancellation for your records.

Record-Keeping and Practical Tips for Pubs

Good record-keeping underpins accurate returns and protects you if HMRC asks questions. HMRC expects you to keep:

• Copies of all MGD returns
• Evidence of machine takings (meter readings, collection sheets, and banking records)
• Working papers showing how net takings and duty were calculated

Keep MGD records for at least four years. A simple spreadsheet logging each machine's weekly takings, prize payouts, and collections, reconciled quarterly against the figures reported to HMRC, is usually sufficient for a small pub business.

Speak to your accountant if you are unsure whether a particular machine, promotion, or profit-sharing arrangement with a supplier affects how you should calculate or pay Machine Games Duty.

Frequently Asked Questions About Machine Games Duty (MGD)

Do I still need to file an MGD return if my pub's machines were switched off all quarter?

Yes. An MGD return is required for every accounting period, even if there were no takings. Submit a nil return by entering 0 in all boxes. Once machines are permanently removed and your responsibility ends, cancel your registration so future returns are no longer required.

Can my machine supplier look after MGD for me instead?

While a supplier may help with readings and figures, HMRC usually regards the premises operator as the person legally responsible. Check your contract to see who is responsible for each task, but remember that HMRC will look to the registered person. Always review the figures yourself and keep copies.

What happens to Machine Games Duty when I take over an existing pub?

The previous operator's registration does not transfer. You must register for MGD in your own name before making machines available. Include in your handover checklist confirmation that the previous registration will be cancelled and take meter readings on the transfer date for a clean break.

Is there a minimum level of takings below which I do not need to pay MGD?

No. If a machine is dutiable, you must register, file returns, and pay the correct duty on whatever net takings arise. If machines are replaced with non-dutiable amusement machines, review your position and consider cancelling your registration.

How long should I wait after posting a paper MGD return before chasing HMRC?

Post well before the deadline using a service with proof of posting. If you have not received confirmation within a few weeks, contact the HMRC helpline with your posting details. Switching to online filing for future periods reduces postal risk and provides immediate confirmation.