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HM Revenue and Customs Brief 01/11


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Issued 19 January 2011

VAT and AMLD: HMRC's treatment of electronic lottery machines and bingo machines

This Brief explains HM Revenue & Customs' (HMRC's) position following the Tribunal decision in Oasis Technologies (UK) Limited (Case ref TC00581). It also explains the treatment of electronic bingo machines.

1. Lottery machines


The Tribunal agreed with HMRC that the Oasis Electronic Lottery Ticket Vending Machine (ELTVM) is a gaming machine. However, the Tribunal found that the Oasis ELTVM also grants the right to participate in a lottery and that the takings from this machine are exempt from VAT. HMRC is not appealing the decision.


Oasis hired out ELTVMs to private members’ clubs and sold them virtual electronic lottery tickets for use in the machines. There was no issue concerning the liability of these supplies. The Tribunal appeal concerned the VAT liability of the supplies made by the clubs using these machines and whether they qualified for exemption from VAT.

An ELTVM displays a lottery ticket on-screen and shows whether a player wins a prize or not. The tickets are stored within an electronic pack of a finite number of pre-drawn winning and non-winning tickets. Packs of tickets are randomised securely prior to being supplied to clubs and are downloaded onto the hard drive of the ELTVM. The order in which tickets are displayed is fixed once downloaded and cannot be influenced by the player or club making the supply.

Tribunal decision

The Tribunal released its decision on 1 July 2010. It held that the Oasis ELTVM is a gaming machine within Note 1(d) to Group 4 of Schedule 9, VAT Act 1994 and that it also grants the right to participate in a lottery within Item 2, Group 4 of Schedule 9. It ruled that the supplies made are exempt from VAT.

HMRC's position

In light of the conclusions of the Tribunal HMRC accept that a machine, whose operation is the same as that of the Oasis ELTVM, shall be treated as granting the right to participate in a lottery. The income thereof is VAT exempt.

The VAT exemption will apply to a machine having all of the following characteristics:

  • the machine must provide a game of chance
  • the tickets must be randomly distributed
  • the player, operator or manufacturer must not be able to influence the order in which a ticket is revealed
  • the result of the lottery must not be determined or influenced by means of the machine, and
  • where groups of tickets have been pre-loaded into a machine, the machine may randomly select a new group when the current one is completed.

Making claims or adjustments

When a business has overdeclared tax on its income from an electronic lottery terminal determined to fall within the findings of the Tribunal, HMRC will pay claims, subject to the normal rules on capping.

We may also reject all or part of a claim if repayment would unjustly enrich the claimant.

More details on how to submit a claim and 'unjust enrichment' can be found in Notice 700/45 How to correct VAT errors and make adjustments

Amusement Machine Licensing Duty (AMLD)

While the Tribunal did not consider the liability of the machines to Amusement Machine Licence Duty (AMLD), it did find that the machines in question were gaming machines. This finding is consistent with HMRC’s view that the machines are liable to AMLD.

HMRC is continuing to issue AMLD assessments on lottery machines without an appropriate AMLD licence.

If you do not agree that your ‘electronic lottery terminal’ is a gaming machine you should phone the HMRC Helpline on 0845 010 9000 with full details of the game. If HMRC think that your ‘electronic lottery terminal’ is a licensable machine we will issue you with a default licence and assess for the outstanding duty. You will then be able to challenge the decision by requesting a statutory review by HMRC or by appealing to an independent tribunal.

2. Bingo machines

HMRC is aware that a number of manufacturers in the gaming industry have recently developed machines which are used to play an electronic version of bingo.

Where a machine meets the characteristics of bingo machines listed in guidance published by the Gambling Commission in June 2009 ('Key characteristics of bingo'), although some of the criteria are for regulatory purposes only, HMRC will accept that for VAT and gambling duties taxation the machine is designed or adapted for playing bingo.

The supply made thereof is exempt from VAT under Item 1, Group 4, of Schedule 9, VAT Act 1994.

If a machine will only allow playing of bingo, it does not require an AMLD licence.

Further information

For further information and advice please contact the Helpline on 0845 010 9000.

More information to help businesses decide whether their amusement machine is liable to AMLD can be found in Notice 454 Amusement Machine Licence Duty. Exemptions are covered in section 3.

About the Author

© Crown Copyright 2011.

A licence is needed to reproduce this article and has been republished for educational / informational purposes only. Article reproduced by permission of HM Revenue & Customs

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Article Published/Sorted/Amended on Scopulus 2011-01-26 14:13:18 in Tax Articles

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