As the trade association, BACTA, gathers for its annual convention today, one of the prime topics of discussion was likely to be the scare circulating the industry this week that HM Customs has seized some SWP machines which pay out high-value prizes, apparently declaring that they should be taxed at £250 per year and threatening to demand back-tax for several years.

According to some of the reports circulating the business, Customs officers had also declared that the machines should be sited within the ‘over 18s’ zones of arcades.

In a circular letter to BACTA members, the association’s Leslie MacLeod-Miller named eight machines from six different manufacturers, which he said he understood were the targets of Customs.  Although InterGame has the list of machines, we have decided not to publish it without information on how the list was compiled.

The problem has ability to become escalated to affect large numbers of the approximately 40,000 SWPs currently in use in the UK. But it is not clear whether this is an orchestrated campaign by Customs to widen its tax net, or isolated examples of irresponsible operators ignoring the ‘gentlemen’s agreement’ under which the industry has operated SWPs until now. That agreement cited stakes and prizes values at 50p and £50 respectively, but there are suggestions in the industry that many operators ignore the prize limit, which may have contributed to this week’s situation.

According to the circular letter the Investigation Unit at Revenue and Customs (responsible for the current campaign), had told MacLeod-Miller that the instructions had come from the Policy Unit. It was actioned because it found a machine operating with a £300 PF3 prize on a 50p stake. "Their point of view is that if these were skill machines people would develop the ability to win these prizes consistently for 50p and then sell them on eBay. It seems this is not happening."

MacLeod-Miller said that Customs had quoted Section 23 of the VAT Act which mirrored Section 6 of the Gambling Act 2005, stating that a game of chance includes: "A game that involves an element of chance and an element of skill; a game that involves an element of chance that can be eliminated by superlative skill; and a game that is presented as involving an element of chance."

HMRC’s Policy Unit has been asked by BACTA for a meeting next week (Tuesday) to discuss the matter. Meanwhile, the association is reminding members that a £50 value prize limit should be strictly observed in prize SWP machines.