Charge higher-stake machines at the Machine Games Duty higher rate from April 2027

changelog.d/mgd-higher-stake-2027.added.md

@@ -0,0 +1 @@
+Machine Games Duty charges the new `machine_games_standard_rate_higher_stake_net_takings` input, the part of standard-rate takings from machines with a maximum charge to play above £1 or a maximum prize above £100, at the higher rate of 25% from 1 April 2027 (Budget 2026, OOTLAR paragraph 1.50). The dated parameter `gov.hmrc.gambling_duty.machine_games.higher_stake_machines_at_higher_rate` switches the change on.

docs/engineering/gambling-duties.md

@@ -97,7 +97,8 @@ Supply attributed dutiable net takings separately:
 | Input | Rate | Statutory machine class |
 | --- | --- | --- |
 | `machine_games_lower_rate_net_takings` | 5% | Every dutiable game costs at most 20p and has a maximum cash prize of at most £10. |
-| `machine_games_standard_rate_net_takings` | 20% | The machine does not qualify for the lower rate, and every dutiable game costs at most £5. |
+| `machine_games_standard_rate_net_takings` | 20%, except the part below | The machine does not qualify for the lower rate, and every dutiable game costs at most £5. |
+| `machine_games_standard_rate_higher_stake_net_takings` | 20% to 31 March 2027, then 25% | The part of the standard-rate input from machines with a maximum charge to play above £1 or a maximum prize above £100. |
 | `machine_games_higher_rate_net_takings` | 25% | Other dutiable machines. |
 
 Classify the entire machine using all dutiable games it offers. Exactly £5 per
@@ -110,6 +111,69 @@ class's net takings by premises.
 Sources: [Finance Act 2012, Schedule 24](https://www.legislation.gov.uk/ukpga/2012/14/schedule/24)
 and [HMRC Notice 452](https://www.gov.uk/guidance/machine-games-duty-excise-notice-452).
 
+### Higher-stake machines from 1 April 2027
+
+Budget 2026 moves machines with a maximum charge to play of more than £1, or
+a maximum prize of more than £100, from the standard rate of 20% to the higher
+rate of 25% from 1 April 2027. Finance Bill 2026-27 will amend the stake and
+prize thresholds that set each machine's type, and with it the rate
+([OOTLAR paragraph 1.50](https://www.gov.uk/government/publications/budget-2026-overview-of-tax-legislation-and-rates-ootlar/budget-2026-overview-of-tax-legislation-and-rates-ootlar)).
+Today, Finance Act 2012 Schedule 24 paragraph 5(3) puts every machine outside
+the lower-rate class with a highest charge of at most £5 in the standard-rate
+type. From 1 April 2027, such a machine stays at the standard rate only if its
+maximum charge is at most £1 and its maximum prize at most £100: a machine at
+exactly £1 and £100 stays at 20%, while £1 with a £500 prize, or £2 with a
+£100 prize, moves to 25%.
+
+`machine_games_standard_rate_higher_stake_net_takings` is a subset of
+`machine_games_standard_rate_net_takings`, not a separate amount:
+
+- The standard-rate input keeps its meaning: takings from every machine with a
+  highest charge of at most £5 outside the lower-rate class. A dataset without
+  the new input gives the duty before Budget 2026 in every year.
+- HMRC's standard-rate liabilities for periods before 1 April 2027 include the
+  higher-stake machines, so a provider that builds the standard-rate input
+  from them needs no change. From that date HMRC reports those machines at the
+  higher rate. A provider that builds the inputs from later liabilities must
+  add their takings back to the standard-rate input and leave them out of the
+  higher-rate input. Take £100 of remaining standard-rate takings and £100 of
+  higher-stake takings: the duty comes to £45. A provider that leaves the £100
+  out of the higher-rate input but doesn't add it back gets £25; one that does
+  neither gets £50.
+- A data provider supplies the higher-stake share of that base, for example
+  from the Gambling Commission's machine yield by category. The class
+  corresponds closely to Category B, whose limits ([B1: £5 stakes; B2, B3 and
+  B3A: £2 and £500; B4: £2 and £400](https://www.gamblingcommission.gov.uk/licensees-and-businesses/guide/gaming-machine-categories))
+  exceed one of the thresholds. Category C (£1 and £100) and Category D stay
+  within them. The tax class turns on the highest charge and prize a machine
+  actually offers, so a category split approximates it.
+- The duty floors the new input at zero and caps it at the standard-rate input.
+  It never taxes takings that the standard-rate input leaves out.
+
+Within the 6 April to 5 April model year, the change splits by day, as
+paragraph 6(6) (a machine that changes type) and paragraph 9(4) (a rate that
+changes) require within an accounting period. Model year 2026 charges the
+higher-stake part at 25% for 5 of its 365 days, 1 to 5 April 2027; model year
+2027 and later charge all of it at 25%. For £1,000 of standard-rate takings,
+£400 of them higher-stake, the duty rises from £200 to £200.27 in 2026 and to
+£220 from 2027.
+
+The dated switch
+`gov.hmrc.gambling_duty.machine_games.higher_stake_machines_at_higher_rate`
+turns on from 1 April 2027. Set it to false for the counterfactual without the
+change, or move its date to delay it. It shares fiscal-year segments with the
+rates, so a rate reform applies to the higher-stake part at whichever rate the
+switch selects.
+
+The policy costing puts the measure at £135 million in 2027-28 and £130
+million a year to 2031-32
+([Budget 2026 policy costings, page 67](https://assets.publishing.service.gov.uk/media/6ae1883fe4367e5c8b0467df/AB26_Policy_Costing.pdf#page=67)).
+That costing grows its base with the OBR's Machine Games Duty forecast and nets
+off a behavioural response: an elasticity of -0.95, a quarter of lost stakes
+moving to Remote Gaming Duty, general attrition and lower Corporation Tax. The
+model applies the rates statically to supplied takings and reproduces none of
+those responses.
+
 ## Bingo Duty
 
 Supply `bingo_net_receipts`, the household's nonnegative share of dutiable
@@ -260,7 +324,7 @@ figures, rounded. These are cash receipts for a 1 April to 31 March year, so a
 reconciliation must handle the timing, period and coverage differences
 described for the casino proxy.
 
-The three machine tax-class bases cannot score a betting-shop-only reform
+The machine tax-class bases cannot score a betting-shop-only reform
 without joint tax-class-by-premises yield data. Premises shares alone do not
 identify that allocation, and machine counts do not provide yield weights.
 No assumption of independence between premises and tax class enters the

policyengine_uk/parameters/gov/hmrc/gambling_duty/machine_games/higher_stake_machines_at_higher_rate.yaml

@@ -0,0 +1,22 @@
+description: Whether the UK charges Machine Games Duty at the higher rate, instead of the standard rate, on net takings from standard-rate machines with a maximum charge to play above GBP 1 or a maximum prize above GBP 100.
+values:
+  2013-02-01: false
+  2027-04-01:
+    value: true
+    reference:
+      - title: Budget 2026 Overview of Tax Legislation and Rates, paragraph 1.50
+        href: https://www.gov.uk/government/publications/budget-2026-overview-of-tax-legislation-and-rates-ootlar/budget-2026-overview-of-tax-legislation-and-rates-ootlar
+      - title: Budget 2026 policy costings, Machine Games Duty higher stake machines, page 67
+        href: https://assets.publishing.service.gov.uk/media/6ae1883fe4367e5c8b0467df/AB26_Policy_Costing.pdf#page=67
+metadata:
+  unit: bool
+  period: year
+  label: Machine Games Duty higher rate on higher-stake machines
+  reference:
+    - title: Finance Act 2012, Schedule 24, paragraph 5
+      href: https://www.legislation.gov.uk/ukpga/2012/14/schedule/24/paragraph/5
+    - title: Finance Act 2012, Schedule 24, paragraph 6
+      href: https://www.legislation.gov.uk/ukpga/2012/14/schedule/24/paragraph/6
+    - title: Budget 2026 Overview of Tax Legislation and Rates, paragraph 1.50
+      href: https://www.gov.uk/government/publications/budget-2026-overview-of-tax-legislation-and-rates-ootlar/budget-2026-overview-of-tax-legislation-and-rates-ootlar
+  preserve_calendar_dates: true

policyengine_uk/parameters/gov/hmrc/gambling_duty/machine_games/rates/standard.yaml

@@ -1,4 +1,4 @@
-description: The UK levies Machine Games Duty at this rate on dutiable net takings from machines outside the lower-rate class on which every dutiable game costs at most GBP 5.
+description: The UK levies Machine Games Duty at this rate on dutiable net takings from machines outside the lower-rate class on which every dutiable game costs at most GBP 5, and, from 1 April 2027, at most GBP 1 with a maximum prize of at most GBP 100.
 values:
   '2013-02-01': 0.2
 metadata:
@@ -12,4 +12,6 @@ metadata:
     href: https://www.gov.uk/guidance/machine-games-duty-excise-notice-452
   - title: HMRC historical gambling duty rates
     href: https://www.gov.uk/government/statistics/uk-betting-and-gaming-statistics/historical-uk-betting-and-gaming-duty-rates
+  - title: Budget 2026 Overview of Tax Legislation and Rates, paragraph 1.50
+    href: https://www.gov.uk/government/publications/budget-2026-overview-of-tax-legislation-and-rates-ootlar/budget-2026-overview-of-tax-legislation-and-rates-ootlar
   preserve_calendar_dates: true

policyengine_uk/tests/policy/baseline/gov/hmrc/gambling_duty/machine_games_duty.yaml

@@ -36,3 +36,70 @@
     machine_games_higher_rate_net_takings: 1_000
   output:
     machine_games_duty: 250 # Only the higher-rate base: 1,000 * 25%.
+
+- name: Case 6, before April 2027 higher-stake takings stay at the standard rate.
+  period: 2025
+  input:
+    machine_games_standard_rate_net_takings: 1_000
+    machine_games_standard_rate_higher_stake_net_takings: 400
+  output:
+    machine_games_duty: 200 # 1,000 * 20%; the higher-stake part is within it.
+
+- name: Case 7, FY2026 charges five of its 365 days at the higher rate.
+  period: 2026
+  input:
+    machine_games_standard_rate_net_takings: 36_500
+    machine_games_standard_rate_higher_stake_net_takings: 7_300
+  output:
+    # OOTLAR 1.50 from 1 April 2027: 36,500 * 20% + 7,300 * 5% * 5 / 365.
+    machine_games_duty: 7_305
+
+- name: Case 8, from FY2027 higher-stake takings use twenty-five percent.
+  period: 2027
+  input:
+    machine_games_standard_rate_net_takings: 1_000
+    machine_games_standard_rate_higher_stake_net_takings: 400
+  output:
+    machine_games_duty: 220 # 600 * 20% + 400 * 25%.
+
+- name: Case 9, the higher rate continues in later years.
+  period: 2029
+  input:
+    machine_games_standard_rate_net_takings: 1_000
+    machine_games_standard_rate_higher_stake_net_takings: 400
+  output:
+    machine_games_duty: 220
+
+- name: Case 10, the duty caps higher-stake takings at the standard-rate base.
+  period: 2027
+  input:
+    machine_games_standard_rate_net_takings: 1_000
+    machine_games_standard_rate_higher_stake_net_takings: 1_500
+  output:
+    machine_games_duty: 250 # 1,000 * 25%; the extra 500 is not in the base.
+
+- name: Case 11, higher-stake takings without a standard-rate base give no duty.
+  period: 2027
+  input:
+    machine_games_standard_rate_higher_stake_net_takings: 1_000
+  output:
+    machine_games_duty: 0
+
+- name: Case 12, negative higher-stake takings leave the standard rate on the whole base.
+  period: 2027
+  input:
+    machine_games_standard_rate_net_takings: 1_000
+    machine_games_standard_rate_higher_stake_net_takings: -500
+  output:
+    machine_games_duty: 200
+
+- name: Case 13, all four bases in FY2027 reach gambling duty and household tax.
+  period: 2027
+  input:
+    machine_games_lower_rate_net_takings: 1_000
+    machine_games_standard_rate_net_takings: 2_000
+    machine_games_standard_rate_higher_stake_net_takings: 1_000
+    machine_games_higher_rate_net_takings: 3_000
+  output:
+    machine_games_duty: 1_250 # 50 + 1,000 * 20% + 1,000 * 25% + 750.
+    gambling_duty: 1_250