Tax changes could have sting in the tail for region’s arcade and gaming machine owners

Owners of amusement arcades and gaming machines across the region are being warned of a potential 'sting in the tail' on tax rules for amusement arcades and gaming machines.

Many arcade and gaming machine owning companies including pubs and tourist businesses across the region have recently enjoyed VAT refunds of thousands of pounds following a successful legal challenge two years ago against HM Customs and Revenue (HMRC) on overpayments.

But Richard Wild, Director of VAT in East Anglia for PKF Accountants and businesses advisers, warned those who have hit the jackpot that there could be a sting in the tail.

'It's true that some clients have had six figure refunds recently and it is not too late for other claims to go in – even if it seems too good to be true,' he said.

'But even though HMRC is making the refunds, it is still fighting its corner with litigation in the European courts. If it should win, it would want the money back.'

He said that whatever the outcome, the government plans to introduce a new Machine Games Duty (MGD) over the next couple of years which could make life much tougher for owners – even though their gaming machines will become VAT-exempt.

'The moral is to try to get your money while you can,' Mr Wild added. 'Everybody in the sector should make a claim but be mindful of what might happen in the future and seek advice on how best to deal with it,' he said.

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Reports suggest that claims totalling well in excess of �100m have been made across the country, with the Rank group successfully leading the way through litigation.

Mr Wild said that refund claims could still be made for VAT paid on takings from certain machines over the last four years but they are unlikely to be paid out until the result of the current litigation is known and it could be 2013 before the planned MGD is introduced.

The new tax is expected to be based on net takings from machines (i.e. stakes less prizes), although there is no indication as to the rates of tax,

The proposals have already sparked anger from pubs, which feel the next tax threatens their future use of money-spinning games machines, and from coastal amusement arcades who fear they could be put out of business.