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SWP issue rumbles on

The ongoing saga of the Skills with Prizes (SWP) and HMRC has taken another turn with a recent announcement from the HMRC.

In a statement, supported (once again) by the Gambling Commission, the HMRC have provided further details on their definition of a "gaming machine" and when a supposed SWP machine can stray into this category.

We have followed this issue for some time and for a fuller history please refer to our earlier articles: When is gambling commission advice, not advice? , HMRC clarifies Polices on Quiz Games and Tax Arrears', 'Skill with Prizes' machines - update' and ‘Skill with Prizes' machines - a developing issue?

In short, in 2009 the HMRC made an announcement that many SWP machines in circulation were, in their opinion, "gaming machines" and were therefore liable for Amusement Machine Licence Duty (AMLD). Those who had not previously registered (practically everyone) were liable for additional fines and back payments. A huge potential liability estimated at £85m loomed over the industry that was understandably up in arms.

In light of considerable pressure from industry groups such as BACTA and BBPA amongst others, a review was announced by the previous government and recently concluded on the 30th June 2010.

During the consultation, guidance was issued by the Gambling Commission entitled  "Is a prize machine a gaming machine?" This guidance was found to be wholly insufficient from an industry point of view posing several more questions while answering non definitively.

In the most recent statement from the HMRC further clarification, agreed by the Gambling Commission, has been published. In addition, the HMRC reaffirmed its view that arrears of AMLD are not now due in the case of quiz games because the HMRC's 2007 version of public notice number 454 entitled "Amusement Machine Licence Duty" was misleading.

They have also rowed back on previous statements regarding popular SWP games such as "Cluedo" and "Monopoly" which they had previously categorised as "gaming machine" games. Following a second view, the HMRC have now decided (correctly) that the "dice" utilised in these games does not affect the player's chance of winning and therefore these games are not "gaming".

The new guidance, although not absolute, does provide a better understanding of the HMRC view. Included within the guidance is an offer by the HMRC to make specific rulings where there is "genuine" doubt as to the status of machines. Such requests should be made to:

The Gambling Taxes Policy Team

HM Revenue & Customs
3rd Floor, Ralli Quays,
3 Stanley Street
Salford
Greater Manchester
M60 9LA

The new guidelines will take effect on the 1st November 2010 after which date machines falling within the definition of gaming machines will be liable for AMLD and arrears of payments.

The full announcement can be read here, to summarise the additional criteria are:

1. The game must be a test of skill such as knowledge, dexterity, visual recognition, logic, memory, reaction, hand-to-eye coordination, numerical and lexical ability, or a mixture of any of these skills.

2. The game rules and game play instructions must be available to the player prior to crediting the game.

3. The game must not look like a recognised game of chance which will depend upon the whole presentation of the game. While no single factor is determinative, the game should seek to avoid:

• G1ambling themes (e.g. casino games, bingo, and lotteries);
• Symbols associated with gambling (e.g. fruit symbols associated with reel- based gaming);
• Word associated with chance or gambling (e.g. "lucky", "random", and "jackpot");
• Any "Repeat Win Feature" that enables a player to win a second prize without completing successfully another game of skill.

4. There should be a reasonable amount of player interaction to win a prize.

5. All advertised prizes must be available to win in each game.

6. The level and type of skills required to win( including reaction time) must be reasonable considering the context of the game in question.

Indicative examples of this would include:

• The time to react to a visual stimulus should not be less than around 225 milliseconds.
• For quiz gamers there should be sufficient time to read the question and all possible answers (normally at least 5 seconds)
• In visual recognitions games, such as spot the difference, all observations must be visible to the human eye an there should be at least 2 seconds per observation
• The time to memorise 50 upturned cards of various symbols should be at l east 10 seconds.

7. The level of difficulty may vary from game to game for the purpose of challenging a player's use of skill provided that it is within reasonable bounds, for example at its hardest setting a player is not required to complete more than three times as many actions as he would be required to do at the game's easiest setting.

8. The game must not enable the operator to change the game settings so that the game ceases to be compliant with characteristic 6 above.

For further information please contact either Tim, Chris or Jonathan.