Gambling and betting was not taxed effectively in the UK for most of history. Unlicensed gambling was causing such a legal and moral problem to the Victorians that the parliament of the time issued the Gaming Act of 1845. This made a wager unenforceable by law and therefore rendered all contracts between bettor and bookie invalid. Gambling and Taxation. Essentially betting is ‘tax-free’ in the UK – the professional gambler is outside the scope of tax. This is confirmed in HMRC’s Business Income Manual at BIM22015. The basic position is that betting and gambling, as such, do not constitute trading. This is not a new precedent either. American citizens are taxed on their gambling winnings in their home country, UK citizens aren’t (in their’s). So, if you travel to Las Vegas, get lucky, and win big on the slots (say the Siberian Storm slot) or the blackjack tables, or you beat the roulette table with the Martingale or the Labouchere system, do you have to pay tax? Totaling a taxpayer's Forms W-2G, Certain Gambling Winnings, for the year would seem to be the straightforward way to determine the amount of gambling winnings to report on a tax return. Forms W - 2G, however, do not necessarily capture all of a taxpayer's gambling winnings and losses for the year.
The tax situation for Britain has made it increasingly a great location for gamblers around Europe that are professionals and to do this for a living, to try and live in the UK for a permanent residence. Read down below to find out more. Do you pay tax on gambling winnings UK? So, gambling from a player’s perspective is always free within the UK.
In countries where gambling is legal, government revenue from the gambling industry has been rising rapidly. Ever since the advent of the Internet, the gambling industry has grown significantly.
In the UK, for example, between 2009 and 2010, four percent of adults had placed at least one bet online. Today, that percentage is nearing 8%.
The gambling industry, since its inception, has found new ways to take advantage of new tech developments. The industry is evolving rapidly. Websites that feature, for example, information on best betting apps, have to update their data much more frequently today than before.
Gambling is the act or practice of playing games of chance for a stake. In the vast majority of cases, the stake is money. However, it could be any possession, including the ‘shirt on his back’ if the gambler has run out of money.
Nevada revenue from gambling industry
Nevada is a western US state with a population of nearly three million. Its most famous city, Las Vegas, is home to many 24-hour casinos. The Nevada Gaming Commission says that in the Las Vegas strip area alone, there are 45 casinos.
In 2017, Nevada casinos generated $26.2 billion (€23.05bn, £20.06bn) in gambling revenue. This represented a 3% increase compared to 2016.
The total was a new record and meant that gambling tax receipts were once again higher than they had been before the 2007/8 Global Financial Crisis.
UK Government revenue from gambling industry
In the UK, the gambling industry is huge. In 2017, government revenue, i.e., tax, from the gambling industry, reached £13.8 billion.
Ten years ago, gambling laws in the UK were liberalized. Since then, tax revenue from gambling has risen by 65%.
The Gambling Act 2005 came into force in 2007. It allowed TV advertising for sports betting, poker, and online casinos. In other words, it meant that betting firms had direct access into our homes.
Government income from online betting, rose from £817 million in 2009 to £4.5 billion in 2017, says The Guardian. Today, online betting represents more than one-third of the UK’s gambling industry.
Ireland to double gambling tax
Gambling tax in Ireland is set to double from one to two percent for both online and retail bets. Duties that the government levies on gambling exchanges will also rise, from 15% to 25% – this is when betting shops (bookmakers) match wagers between customers.
The Irish gambling industry warns that the new taxes will ‘kill the industry.’ The Telegraph quotes Paddy Power Betfair which said the new taxes would increase its betting duty bill by £20 million.
Can gambling be taxed as earnings? Julie Butler considers a recent case on gambling which covers issues frequently raised in the TaxationWeb forum.
Gambling and Taxation
Essentially betting is ‘tax-free’ in the UK – the professional gambler is outside the scope of tax. This is confirmed in HMRC’s Business Income Manual at BIM22015. The basic position is that betting and gambling, as such, do not constitute trading. This is not a new precedent either. Rowlatt J said in Graham v Green (1925) 9 TC 309: “A bet is merely an irrational agreement that one person should pay another person on the happening of an event.”
This decision has stood the test of time. In an Australian case, Evans v FCT (1989) 20 ATC 4540, Hill J said: “There has been no decision of a court in Australia nor, so far as I am aware, in the United Kingdom where it has been held that a mere punter was carrying on a business.”
A recent case has tested this principle. In Hakki v Secretary of State for Work and Pensions [2014] EWCA Civ 530 Mr Hakki was a professional poker player who made a living from his poker winnings. An order for Mr Hakki to pay child maintenance was applied for through the Child Support Agency by the mother of his children (Mrs Blair).
In accordance with the Social Security Contributions and Benefits Act 1992 (SSCBA 1992) s2(1)(b) and the Child Support (Maintenance Assessment and Special Cases) Regulations 1992 Mr Hakki opposed the application on the grounds that his poker winnings did not constitute ‘earnings’ from gainful employment and therefore he was not a self-employed earner, i.e., the profits arose from gambling.
It is very interesting to note that the Upper Tribunal found that for the purposes of SSCBA 1992, gambling could be a trade, profession or vocation, and that Mr Hakki could be said to be ‘gainfully employed’ as a ‘self-employed earner’ and therefore should pay child maintenance to Mrs Blair.
Mr Hakki appealed to the Court of Appeal. Mrs Blair’s barrister argued that Hakki’s poker playing amounted to a trade similar to that of a professional golfer or tennis player. The barrister relied on the findings that Mr Hakki:
- Set a target sum to win after which he stopped;
- Selected the table which was most likely to pay him;
- Appeared on a television programme about poker for a few weeks, made it to the final and won a prize;
- Was the owner of his own website and communicated his strategies for online poker;
- Had his poker results over seven or eight years published on two other poker websites; and
- Chose the locations for playing poker.
The Court of Appeal found that even collectively these findings do not amount to such organisation as to constitute a trade, profession or vocation. The Court of Appeal found that gambling is not a trade and the factors surrounding Mr Hakki must be common to many successful gamblers, e.g., choice of location, setting target sums and the table most likely to pay. It was found that isolated appearances on television and Mr Hakki having his own website was not in 2014 evidence of organisation amounting to a trade or profession. It is also very interesting to note that the court was persuaded that it is possible to accept a case in which a gambler’s winnings might be taxable, but it found that in this case there was no organised seeking of emoluments and therefore no gainful employment.
This case adds to the ongoing discussion about whether a gambler in certain circumstances can be taxed on his or her winnings.
Will there be future legislation that brings gambling profits into the scope of taxation? There has apparently been nothing to indicate that this is under review despite the advent of very sophisticated techniques to make substantial profits from gambling. It has to be asked, what is “the case” that the courts can find as taxable? Is that perhaps the case with sophisticated software?
Back to Tax ArticlesPlease register or log in to add comments.
Gambling Winnings Tax Uk
Gambling Tax Laws Uk
Click on the button below to get the most burning tax topics delivered to your email.
Subscribe to Our Newsletter