Taxman

phone them and tell them you gamble for a living they will put you down as not working, this way you dont have to worry

NI is optional unless you are registered as self-employed in which case you pay voluntary contributions, it's around £130 a year now. It keeps you in the system!

Thanks guys very helpful..any other thoughts appreciated

Have you asked your accountant for his opinion on this ? I wouldn't approach the IR without advice from a shrewd accountant.Better to say you've been "lucky" and won money from gambling rather than you gamble "for a living".You don't want to set any precedents,or give any ambitious taxman any ideas !

If I was in your situation I wouldn't bother.  Claiming would involve means testing and even though you probably would qualify you never know how regulations may change in this age when Govt are looking to make cutbacks any way they can.

I have income.  My wife has income. 

Because I moved here eleven years ago and have my own business, I was careful to research everything since I wanted to build proper credit, etc, and relationships with my bank.

Gambling 'revenue': from betting, it is not considered income. 

unless

- you earn it through consultation at which point you declare it as 'other' income.

- you receive 'credits' from bookmakers for services rendered. 

If the government were to declare income from gambling taxable, they would then have to declare that losses were able to be deducted from your revenue. 

The expression 'can of worms' comes to mind.

CHATTER BOX

claim it there will be no problems -

your earned taxable income is nil - tell em no more..

thin and crispy - no means testing on tax credits

Yep, Delta is correct, you can either just claim it and get an extra £450ish a month, or worry endlessly about ifs and buts, not do it and get nothing.

You're not even doing anything wrong in claiming.

Yep, Delta is correct, you can either just claim it and get an extra £450ish a month, or worry endlessly about ifs and buts, not do it and get nothing.

You're not even doing anything wrong in claiming.

Sorry for duplicate, i blame my computer.

thin and crispy - no means testing on tax credits

So if you say I have no income they never ask for proof eg Bank Statements etc they never bother to check,just take your word for it and dole out the money?

^ sorry T & C - I meant no means testing as in u could have 100k in savings etc..

they know ur earned [taxable] income from the tax system

Think you have to work at least 16 hours a week to get tax credits - gambling isnt work

^^^^
I believe its at least 24 hours jointly if you are a couple with one of you working at least 16.

he would be claiming child tax credit - which has no requirement of hours worked

the hours mentioned above are for working tax credit

yeah that seems right I looked it up - bit of a scam, but as long as the elites in our country avoid paying there fair share, then gl to OP imo

There is a school of thought within HMRC that someone who derives their income from gambling is in fact engaged in an occupation and that that income should therefore be taxable.

I don't know if they've tried to argue this before a tribunal, but my friend is a tax consultant so I'll ask him about it.

"There is a school of thought within HMRC......".How do you know this ?

Dec 22, 2012 -- 7:52PM, Liscarroll wrote:

There is a school of thought within HMRC that someone who derives their income from gambling is in fact engaged in an occupation and that that income should therefore be taxable.I don't know if they've tried to argue this before a tribunal, but my friend is a tax consultant so I'll ask him about it.

This is the one you want:  Graham v Green (1925) 9 TC 309

A little before the days of betting exchanges but the judgment is a great read.

@artie:

From my tax consultant friend.

Dec 23, 2012 -- 4:55AM, Liscarroll wrote:

@artie:From my tax consultant friend.

well I wouldn't take his advice on any matter as he is talking pish.

http://www.hmrc.gov.uk/manuals/bimmanual/bim22015.htm

if you want to read HMRCs guidance on the subject

That ^ seems to sum things up quite clearly.

BIM22015 - Trade: Exceptions & alternatives: Betting and gambling - introduction

The basic position is that betting and gambling, as such, do not constitute trading. Rowlatt J said in Graham v Green [1925] 9TC309:

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] 20ATR922, 89ATC4540 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.

However, an organised activity to make profits out of the gambling public will normally amount to trading.

Although over time new forms of games of chance have evolved, these principles remain the same. The taxpayer placing a spread bet is not normally carrying on a trade (see BIM22020 for exceptions). They are not taxable on the profits, nor do they receive relief for their losses. The bookmaker organising the spread bet is taxable on their profits.

The section on betting and gambling contains the following further guidance:

    what is a bet - BIM22016,
    the professional gambler - BIM22017,
    organised activity - BIM22018,
    element of existing trade - BIM22019,
    spread betting - BIM22020.

======================================================================================



BIM22018 - Trade: Exceptions & alternatives: Betting and gambling - organised activity

An organised activity to make profits out of the gambling public will normally amount to trading. An example of this is the bookmaker.

In Partridge v Mallandaine [1886] 2TC179 a professional bookmaker systematically attended racecourses for the purpose of carrying on that activity; he could not legally recover amounts due to him. He was held to be carrying on a vocation and hence assessable to what was then Schedule D, Case II.

Rowlatt J explained the position in Graham v Green [1925] 9TC309 at page 313:

It has been settled that a bookmaker carries on a taxable vocation. What is the bookmaker's system? He knows that there are a great many people who are willing to back horses and that they will back horses with anybody who holds himself out to give reasonable odds as a bookmaker. By calculating the odds in the case of various horses over a long period of time and quoting them so that on the whole the aggregate odds… are in his favour, he makes a profit. That seems to me to be organising an effort in the same way that a person organises an effort if he sets out to buy himself things with a view to securing a profit by the difference in what I may call their capital value in individual cases.

Bookmakers may themselves place bets. Where this is done as part of the trade (“laying off”), the proceeds or losses have to be taken into account in arriving at their profit.

The key feature is that the taxpayer is likely to be involved in the organisation of the activity. They are not mere punters. They are carrying on an activity where the odds are in their favour.
=============================================================================================


Last paragraph still keeps the "can of worms" possible......IF you have a system where "value" is consistently identified and regular profits are made.

However, it is implied from the above that "TRADING" would be HMR&Cs main target, other than Bookmakers,.....as opposed to straight bets BACK or LAY........Well that is how I interpret the above.

just for the avoidance of doubt, when they talk about 'trade' and 'trading', they aren't talking about backing high and laying low

they are talking about 'having a trade', eg a plumber, builder etc who carries out a professional trade

Bookmakers may themselves place bets. Where this is done as part of the trade (“laying off”), the proceeds or losses have to be taken into account in arriving at their profit.

Above implies differently SV.....

and one other 'trick' that means they don't want to cast the net too wide, is that losses from a 'trade' are often offsettable against tax

and most gamblers are losers

so HMRC could be losing revenue if they drag too many gamblers into this particular net

An organised activity to make profits out of the gambling public will normally amount to trading.

==================================================================

Presumably the way BF operates is one member of public against another/others.......so looks like this line covers BF type set up.

If , and it is true, that "most gamblers are losers", then such punters would not fall under the above "organised" ones making a PROFIT.....

SO HM R&C could just eek out net winners, above a certain figure to examine how they make money.Not an "easy" task......but the "can of worms" still appears to be there .

DFCIRONMAN 23 Dec 12 14:44
Above implies differently SV.....

no it doesn't. this series of articles on betting is a subset of the series of articles entitled 'trade'.

http://www.hmrc.gov.uk/manuals/bimmanual/BIM20000.htm

that statement you highlighted refers to people placing bets who have already been identified as having a professional gambling 'trade' eg bookies, casino operators etc, who then place bets which are related to their 'trade'

the key component remains whether they are identified as having a 'trade' in the first place

DFCIRONMAN 23 Dec 12 14:51
SO HM R&C could just eek out net winners

yes they could. and then net losers could use the precedent created to claim for themselves.

the law works both ways. its a can of worms, as you say, but for both sides.

Not convinced of that SV......as BIN22018 heading is ....

Trade: Exceptions & alternatives: Betting and gambling - organised activity


and the last sentence still leaves door open IMO when stating ....

The key feature is that the taxpayer is likely to be involved in the organisation of the activity. They are not mere punters. They are carrying on an activity where the odds are in their favour.

The "losers" would have to prove they fall into the "organised" category......ie making PROFIT regularly ....BEFORE their loss arises.


If they just make LOSSES.....then they don't come under the "exception" BIM22018 outline....

i'm not questioning whether there are areas which are open to interpretation legally. there always are. thats what courts of law are for.

what i am questioning is

- your definition of 'trade'. to me, its clear, since the articles are a subset of the HMRC manuals on 'trade', that they are talking about a 'professional trade', NOT specifically backing high and laying low

- whether HMRC will actually profit from opening this 'can of worms'. the returns are likely to be very low from the very few 'winning gamblers', probably not high enough to even offset their own overhead in investigating this area.

and then on top of that you have the fact that 'trading' losses are offsettable against tax. if they define 'professional trade' as simply using betfair in an organised fashion, for example, then any heavy betfair loser could claim rebates.

HMRC is bound by existing law, although it likes to pretend otherwise. any precedent it creates can work both ways.

DFCIRONMAN 23 Dec 12 15:00
If they just make LOSSES.....then they don't come under the "exception" BIM22018 outline....

if what you say is true, then there would be no need for rules on losses from trade.

yet these rules exist.

The taxpayer always has to prove his/her case.......to qualify for relief from loss incurred in a tax year under the exception BIM22018 outline.

They would need to prove they had a "trade"........and prove they had made net profit over at least 3 fiscal years prior to incurring probably to fall under this possible "exception"........To do so they would also need to have declared the profits made as being taxable income under BIM 22018.

If they have...and made a loss in 4th year....they would be able to claim relief for such a loss in year 4 IMO.

Can't see HMR&C accepting someone making a loss in YEAR 1 as a trading loss.....with proving they have an "organised" way of making net profits generally .

How much they would eek from selected punters could amount to considerable amounts ...based on some of the figures indicated on forum bby some BF members.

with proving they have an "organised" way of making net profits generally .


shout read....without first proving they have an "organised" way of making net profits generally .

Hopefully SV....HMR&C don't decide to open up this "can of worms"......

I suspect most of net winners, at say profits over £50,000, have a systematic way of betting where they are possibly under the "organised" BIM22018 indicated position. Also they would probably be proud that they have such an "organised" way of betting and would not argue they are disorganised !

of course the taxpayer have to prove their case, they always do, in all areas of tax law. so do HMRC, in cases of dispute. this is not news.

the point is, it is the profit motive that is key to trade, not actual profit. HMRC cannot just define 'trade' as 'winners only'. even losing gamblers want to win, just as losing businesspeople want to profit, hence the losing 'tradespeople' get treated as a 'trade' along with the winners.

if they create a definite legal precedent, it will lead to a set of actual rules, described in court, that will apply, and the existing laws do not exclude people making a loss from the definition of a 'trade'.

as you know, its perfectly possible for 2 gamblers to have similar styles (eg value betting on match odds), and for one to make a profit and the other make a loss, based on skill (or even luck).

if both these gamblers are carrying out the same processes, both should be treated equally under law, regardless of profit level.

but anyway DFC, we both agree there are areas 'open to interpretation', and this isn't as clear cut as it may seem

the main difference between us seems to be, you think that HMRC have more power than they actually do. they are bound by law, not above it.

why do you think the super-rich (who can afford the best tax lawyers) can run circles around them?

It is the "exception" BIM22018 that they would fall under...........organised activity.

========================================================================================

By calculating the odds in the case of various horses over a long period of time and quoting them so that on the whole the aggregate odds… are in his favour, he makes a profit. That seems to me to be organising an effort in the same way that a person organises an effort if he sets out to buy himself things with a view to securing a profit by the difference in what I may call their capital value in individual cases.
==================================================================================
Taxpayer would have to prove they fall under BBIM22018 to claim loss....seems like a Catch 22 position really.....prove they HAVE made profit for a LONG TIME before they could claim a loss claim.

HMR&C do have plenty law in their favour....but not in this area re "organised activity".....however, would not discard them taking this up ....IF THEY HAD THE MAN/WOMAN POWER TO DO SO.

There is plenty legislation to allow H M R & C taking on large companies/ super rich ......but they don't appear to have resources to do so.

BIM22016 - Trade: Exceptions & alternatives: Betting and gambling - what is a bet?

The first, and obvious, question is simply what is a bet? A definition of a bet or “wager” was given by Hawkins J in Carlill v Carbolic Smoke Ball Company [1892] 2QB484 and has been followed in later cases:

It is not easy to define with precision what amounts to a wagering contract, nor the narrow line of demarcation which separates a wagering from an ordinary contract; but, according to my view, a wagering contract is one by which two persons, professing to hold opposite views touching the issue of a future uncertain event, mutually agree that, dependent on the determination of that event, one shall win from the other, and that other shall pay or hand over to him, a sum of money or other stake; neither of the contracting parties having any other interest in that contract than the sum or stake he will so win or lose, there being no other real consideration for the making of such contract by either of the parties. It is essential to a wagering contract that each party may under it either win or lose, whether he will win or lose being dependent on the issue of the event, and, therefore, remaining uncertain until that issue is known.
=================================================================================================


From the above it appears you can BACK or LAY....leaving bet to stand......and this is clearly a "bet" under the above definition.

Therefore being "organised" re putting such bets on appears to be "safe" re not taxable IMO.

Traders are the ones who still need to beware BIM22018.....

DFCIRONMAN 23 Dec 12 15:54
HMR&C do have plenty law in their favour....but not in this area re "organised activity"

'this area' is the area we are talking about is it not?

however, would not discard them taking this up ....IF THEY HAD THE MAN/WOMAN POWER TO DO SO.

thats pretty much exactly the point i was making. there would be costs (both direct and opportunity) in pursuing this, and they'd have to be very careful that they didn't create legal precedents that could actually be used against them in future, in areas such as reliefs on trade losses (which can be made against general income, not just related trade income)

it is more complex than HMRC making an arbitrary, unilateral decision that 'all profitable betfair users are carrying out a trade', or something equally broad and vague (and incompatible with current regulations on carrying out 'trade', if they somehow want to disqualify losers from the 'trade' definition)

DFCIRONMAN 23 Dec 12 15:47
Taxpayer would have to prove they fall under BBIM22018 to claim loss....seems like a Catch 22 position really.....prove they HAVE made profit for a LONG TIME before they could claim a loss claim.

it isn't a catch 22 at all. setting out or having a view to make a profit is NOT the same thing as actually making a profit.

all gamblers and tradespeople generally want to make a profit, do they not? and its possible for bookmakers to make losses, is it not?

They could just limit their initial excursion into this "area" by examining BF records and obtaining list of those making profits of say over £50,000 over a few years ( probably 3 in a row).

Enquiries could then be carried out into those with no tax returns submitted or they have submitted them but level of taxable income to their living expenses are questionable etc.

Thereafter, up to those selected that they can prove their betting is not an "organised activity" and is not "trading". For those doing straight BACK or LAY bets, and letting bets stand, they should be OK .....but for those just "trading" in organised way etc they would be open to further enquiry.

Would be relatively "easy" for HMR&C to rapidly exclude those from further enquiry who fall into just BACKING and LAYING and letting bets stand from the others who would need to prove they were not falling under BIM 22018....

Bearing in mind they can go back 6 years in an enquiry.....then go back further years if meets the legal powers to do so......then the amount of revenue and penalties and interest should be more than their costs.

The precedent would not open up a hornet's nest re LOSS CLAIMS.........as first such claimers would have to prove they have been trading in an "organised activity" way and been profitable . This for most PUNTERS would be hard for them ...if not impossible for them to prove. So such claims would be minimal once claimers realise the cost their tax accountants charge for such work!

once again DFC, you are assuming that HMRC will have control over what goes to court, and what areas the court will examine to come to a conclusion and thus create binding legal precedent

all it takes is one wealthy gambler to mount a challenge in court, and then HMRC will be bound in all related decisions by whatever reasoning the court applies, which must be consistent with existing law.

HMRC may get a good outcome, they may not. either way, the law binds them.

It is quite clear that betfair users are not "in the course of business" no matter how betfair is used (except for perhaps bookies "trading" out of positions - they are in the course of business because they negotiate the initial bets).  Betfair is in the course of business (not the users), because they negotiate the bets between user A and user B.

Read the document here where Betfair were in discussions with the HMRC and the decisions esp in the early days of Betfair.  It is quite clear that Betfair usage is not taxable regardless of whether a high or low usage user.  This document is regarding the Levy but it also covers all the other "grey" areas esp the decisions of HMRC regarding a study of known winners and tax situation etc.  I would suggest everybody who is worried about their tax situation (in GB) to read (and print it off in case you ever need it! :S lol):
http://www.hblb.org.uk/responses/4_Betfair.pdf

This will put your mind to rest. Though I would be interested to read anyone's response (after reading this document) if they still believe it is a "grey" area?

It will be the Revenue who decide on whether to push hard on a case or not.......depending on what the wealthy person produces as evidence to support their case.

As a last resort the taxpayer can go to Court, but such an option will be extremely expensive, usually most cases are resolved by settlement.

The Revenue don't fear the law.......and a taxpayer taking them on in Court generally should IMO be avoided.

DFCIRONMAN 23 Dec 12 20:13
As a last resort the taxpayer can go to Court

and a taxpayer taking them on in Court generally should IMO be avoided.

depends how much money is involved, and whether HMRCs interpretation of the law is seen to be reasonable.

the law doesn't just exist for HMRCs benefit. HMRC is engaged in legal wrangles with taxpayers all the time. sometimes it wins, sometimes is doesnt.

DFCIRONMAN 23 Dec 12 20:13
The Revenue don't fear the law

who said anything about fearing the law? fact remains, they are bound by it, whether they fear it or not

GAF .....The First Submission it is clear what position is....not a Bookmaker etc....but this does not cover the " organised activity" BB22018 possibility IMO.
=========================================================================

5.8...Customers of Exchanges are not in "Business"


Rather a sweeping statement.....but again biased re making it clear that a "Bookmaker" situation does not generally arise etc.

In "Business" ........with the degree of sophistication in the techniques that some "gamblers" use, it would be hard to argue they were not "organised" better than most small businesses.

5.8 is really trying to disprove that the "Business of Bookmakers" is not how generally punters bet on Exchanges.
===============================================================================


8.3.2..... The statement that "as long as the hugely profitable betting in question is carried out away from an exchange" ....DOES NOT ELIMINATE THOSE OPERATING WITH "ORGANISED ACTIVITY" ON THE EXCHANGES

=========================================================================

GAF .....I don't think it is "quite clear" form the PDF doc........when you say "It is quite clear that betfair users are not "in the course of business" no matter how betfair is used (except for perhaps bookies "trading" out of positions - they are in the course of business because they negotiate the initial bets).  Betfair is in the course of business (not the users), because they negotiate the bets between user A and user B."

Yup...still believe the "organised activity" under BIM 22018 is still a "grey area" for those who do not BACK or LAY and let bets stand.

The taxpayer is the one who must prove they are innocent in most cases.......the onus is on them....so this is a big advantage if the Revenue go to Court.

Have you ever had a client take on H M R & C in Court? If so, did they "win".....the client that is.

that document is a bit difficult to parse, some of it is just submissions by various random parties with an obvious bias (including betfair themselves)


but other bits seem to quote directly decisions by HMRC and HM Treasury on how to treat exchanges. some of these bits are interesting, referencing the exact issue in the HMRC guidance (is a gambler carrying out a professional 'trade'?)

6.10 "We have looked more widely at whether there is a group of users on betting exchanges who are acting by way of business and are not currently being taxed. Whilst there are clearly differing levels of activity on exchanges and some users do bet in high volumes, there is not sufficient evidence to characterise these users as running a business, as opposed to merely being high-volume gamblers, who have traditionally been outside the tax net"

6.12 HM Treasury expressly found that exchange customers placing lay bets did not fall within that category [of bookmaker]. That decision was based upon a technical legal interpretation of the definition of "bookmaker", applied to an exhaustive examination of the betting being undertaken by the highest volume exchange customers

6.16 We believe any attempt to define a threshold for non-recreational users would inevitably be arbitrary and could not provide any certainty about the point at which a user was undertaking betting transactions in the course of business


the document repeatedly states that pretty much none of this stuff has been tested in court, which is the ultimate test. but the governments (at least in 2005) intended 'spirit of the law' and 'policy' does seem pretty clear (if the quotes are accurate)

DFCIRONMAN 23 Dec 12 21:40
Have you ever had a client take on H M R & C in Court? If so, did they "win".....the client that is.

i'm not a lawyer. but a quick google shows HMRC dont win every case, even against total underdogs.

http://www.out-law.com/en/articles/2012/may/taxpayers-can-rely-on-concession-unless-it-is-publicly-withdrawn-rules-court/

http://blogs.telegraph.co.uk/finance/ianmcowie/100018627/taxman-gets-a-bloody-nose-in-court-but-630000-people-face-deadline-this-month/

http://blogs.telegraph.co.uk/finance/ianmcowie/100018627/taxman-gets-a-blood... ........

This is small fry case........and not relevant should the Revenue decide to tackle those making say over £50,000 that come under BIM 22018.

Each case would have to be judged on its own merit.......a decision can only be based on the taxpayer's circumstances......

Of course  H M R & C don't win every case......but it is a huge "gamble" to take them on through JUDICIAL REVIEW.....

Bound to happen one day re HMR&C taking on a case under the exception BIM22018....IMO.

BIM22018 - Trade: Exceptions & alternatives: Betting and gambling - organised activity


An organised activity to make profits out of the gambling public will normally amount to trading. An example of this is the bookmaker.

In Partridge v Mallandaine [1886] 2TC179 a professional bookmaker systematically attended racecourses for the purpose of carrying on that activity; he could not legally recover amounts due to him. He was held to be carrying on a vocation and hence assessable to what was then Schedule D, Case II.

Rowlatt J explained the position in Graham v Green [1925] 9TC309 at page 313:

It has been settled that a bookmaker carries on a taxable vocation. What is the bookmaker's system? He knows that there are a great many people who are willing to back horses and that they will back horses with anybody who holds himself out to give reasonable odds as a bookmaker. By calculating the odds in the case of various horses over a long period of time and quoting them so that on the whole the aggregate odds… are in his favour, he makes a profit. That seems to me to be organising an effort in the same way that a person organises an effort if he sets out to buy himself things with a view to securing a profit by the difference in what I may call their capital value in individual cases.

Bookmakers may themselves place bets. Where this is done as part of the trade (“laying off”), the proceeds or losses have to be taken into account in arriving at their profit.

The key feature is that the taxpayer is likely to be involved in the organisation of the activity. They are not mere punters. They are carrying on an activity where the odds are in their favour.

The key point above is, that as an exchange user, you don't have an overround to hide behind, you are at the mercy of paying a commission payment on all bets.  As such, you are playing in a negative expectancy game.  This is the key difference between a profitable exchange user and an "organiser".  As such I don't believe BIM22018 applies.  Betfair is the "organiser" as they win through their organised activity!  They duly pay their tax responsibilities for their trade.

6.10/6.12/6.16 all relate to whether Exchange is a Bookmaker or not......

So IMO it is still not clear re BIM22018 and "organised activity" regarding "traders" especially.

It is the last sentence on BIM22018 that is "key"........the position above that is mainly about BOOKMAKERS......

The key feature is that the taxpayer is likely to be involved in the organisation of the activity. They are not mere punters. They are carrying on an activity where the odds are in their favour.

Are you saying GAF that there are no professionals on BF carrying on activities where the odds are in their favour.....in an "organised activity" way? Traders are the ones who are likely to fall into this category if they are say ALL GREEN prior a race starting and where they have achieved this for say 3 years in a row.

DFCIRONMAN 23 Dec 12 23:42
6.10/6.12/6.16 all relate to whether Exchange is a Bookmaker or not......

the quotes i posted from 6.10/6.12/6.16 all clearly refer to exchange USERS or CUSTOMERS

Item "6." covers the "Second Submission".......................

The Second Submission is stated at start of PDF.....re - exchange customers not falling into any special category where they are deemed to be BOOKMAKERS either for duty/tax, regulatory or Levy purposes.

All about not being BOOKMAKERS only..............

Anyway SV and GAF.......at least we have not resorted to abusive posts YET.....so perhaps time to lay this one aside.....and see what happens in NEW YEAR

All the best over holiday period "guys"...or "gals" or both!!!!

G M the nooooooooooooooooo

The odds are not in any betfair "user's favour" as they pay 2-5%+ plus on winning bets. Quoting the hmrc website "on the whole the aggregate odds… are in his favour"... this is not true of a betfair user (trader or not).  An organiser is one who organises the bet for a profit. Betfair is the organiser as they provide the technology to match two parties bets for a guaranteed profit.  The user's don't organise the bet.

Though I am 99% sure that professional bettors are not taxable... an interesting thought I have is... if I am wrong... what tax rate is applicable?  Bookies pay 20% so can't see why a "professional" would pay more than 20% regardless of how much they may have made over a tax year?

If pro bettors did have to pay tax (which they don't) then it would be at your current rate of income tax. If you are a company then you can pay yourself a dividends and be taxed at 20% but as an individual it would just be taxed as earned income.

It may be quite difficult to set yourself up as a company and get the banks to give you a bank account for gambling in this climate but have never tried it so may be wrong.

By the way what is a "professional bettor". Strictly speaking would it not be someone who is payed a fee by someone else for their gambling expertise or do you see it as someone who just makes over a certain amount or is it someone who can't participate in the gambling olympics.

Anyway happy christmas.

swiftynifty 31 Oct 12 22:22 Joined: 16 Jan 07 | Topic/replies: 893 | Blogger: swiftynifty's blog
NI is optional unless you are registered as self-employed in which case you pay voluntary contributions, it's around £130 a year now. It keeps you in the system!


yeh thats pretty much what ive done for the past 6 years. out of interest will this entitle me to the standard

old age pension as well? a few people have said to me that as im not paying the "going rate" of someone in normal

employment then hard to see how i would qualify.

Dec 26, 2012 -- 3:06AM, callataxi wrote:

swiftynifty 31 Oct 12 22:22 Joined: 16 Jan 07 | Topic/replies: 893 | Blogger: swiftynifty's blogNI is optional unless you are registered as self-employed in which case you pay voluntary contributions, it's around £130 a year now. It keeps you in the system!yeh thats pretty much what ive done for the past 6 years. out of interest will this entitle me to the standardold age pension as well? a few people have said to me that as im not paying the "going rate" of someone in normalemployment then hard to see how i would qualify.

get a state pension forecast - if your self-employed years are on there, you should be ok, I thought the base SE contribution counted, but they have changed things a fair bit in recent years.

to DFCIRONMAN, you don't seem to understand the basic law behind tax.  Income Tax is levied on profits from a trade profession or vocation.  The various legal cases have settled that a gambler no matter how skilled and successful is not following a trade profession or vocation.  Profitability is completely irrelevant in this judgement, it is the activity that was considered. 

Bookmaking is considered to be a trade from the way a bookmaker sets himself up in business to accept bets from the public with a view to profiting from favourable odds.  If a bookmaker lost money in a trading year he could offset those profits against other earnings. 

If this position was to change such that "trading" on Betfair were to be classified as a trade and taxable, then all losses from that activity could be offset against other income to the chagrin of HMRC.  I repeat that it is the activity that is relevant and not the profitability.

dave1357-

IMO your interpretation of tax law and legislation such as BIM22018 is "wrong".

You appear to be regurgitating "old" tax law/cases......and also appear to be just restricting the law only applies to Bookmakers. BIM22018 ends up stating :-

The key feature is that the taxpayer is likely to be involved in the organisation of the activity. They are not mere punters. They are carrying on an activity where the odds are in their favour.

This appears to be where the door might open up at some point using - BIM22018 - Trade: Exceptions & alternatives: Betting and gambling - organised activity.

GL with your betting and hopefully HMR&C won't use this in future!

They are carrying on an activity where the odds are in their favour.


It seems obvious to me this means they FIRST must be profitable......not incurring losses which would indicate they did not have an activity where the odds were in their favour!

USA already has -

By Howard Stutz
LAS VEGAS REVIEW-JOURNAL
Posted: Mar. 14, 2011 | 4:05 p.m.
Updated: Mar. 16, 2011 | 6:07 a.m.

Professional gamblers are now able to deduct business expenses incurred as part of their job.

The catch, however, is determining what constitutes a professional gambler.

A January ruling by the U.S. Tax Court changed a portion of a half-century-old opinion that equated expenses related to a gambling trip with gambling losses -- they were deductible only to the extent of their winnings.

The court now believes the expenses to reach a casino or racetrack, and other expenses associated with the activity of gambling, can be written off.

The ruling, experts say, was a victory for gamblers.

"On the whole, gamblers are probably celebrating," said Steve Johnson, a professor at the University of Nevada, Las Vegas Boyd School of Law who has an expertise in tax law. "What the decision says is that gambling is a business trade that is not any different than any other profession. A professional gambler can deduct business expenses."

The ruling by the U.S. Tax Court covered questions sought by Robert Mayo, a professional gambler from California. Mayo wagered $131,760 on horse racing in 2001, collecting $120,463 on his wagers. As part of his tax return that year, Mayo listed expenses of $10,968, which included automobile expenses for travel to the racetracks, and fees for race handicapping information and other research purposes.

The court ruled those expenses were not a wagering loss, but business expenses that contributed to a net operating loss for the year.

"Mayo is an important case, particularly because it's a full decision of the Tax Court," Roger McEowen, a law professor at Iowa State University's Center for Agricultural Law and Taxation, wrote in a January newsletter.

"It also is important because it allows professional gamblers to utilize negative operating losses arising from their gambling business," McEowen said. "The rules governing negative operating losses have been made more favorable in recent years. This is exactly what we've been pointing out to practitioners at seminars since late 2008."

According to the Bradford Tax Institute's Tax Reduction Newsletter, the ruling will allow professional gamblers to amend their last three years of returns where business expenses were not claimed because those years had reported gambling losses.

Experts, however, didn't believe the ruling would lead large numbers of gamblers to begin declaring their trips to Las Vegas as gambling expenses.

Most high-end gamblers are flown to Las Vegas at the expense of the casinos, are given complimentary hotel suites, and afforded free meals, shows and other incentives during their stay.

"While this is a victory for the professional gambler, this doesn't affect very many gamblers at all," said Judy Patterson, the senior vice president and executive director of American Gaming Association in Washington D.C.

"To qualify, gambling really has to be a full-time activity that is the person's principal source of livelihood," Patterson said. "It's a pretty high standard that few will be able to meet."

Tax law experts said the IRS would view professional gambling not as a hobby, but as a full-time profession with participation over a several-year period showing both profits and losses.

The IRS allows a professional gambler to declare winnings and losses on a Schedule C, deducting losses that are larger than winnings.

A spokesman for the Internal Revenue Service said the agency doesn't comment on specific cases. The IRS website has different rules for professional gamblers than for nonprofessional gamblers.

"Although the law does not define a gambling trade or business, the IRS looks to all the facts and circumstances to make a determination on a case-by-case basis," said IRS spokesman Raphael Tulino.

Johnson said there will most likely be limitations as to what a professional gambler can deduct as travel expenses. For example, the cost of an airline ticket might be deemed as reasonable, but a professional gambler most likely wouldn't be able to write off the cost for buying an airplane.

All 16 judges on the Tax Court took part in the ruling. Johnson believes other cases, similar to the facts in the Mayo decision, will be filed at some point, which could alter or clarify the ruling.

"We know taxpayers are going to push the envelope on gambling losses and gambling expenses," Johnson said. "There is a going to be further battleground in these cases."

USA IRS take into account various factors into account in determining whether someone is a "professional gambler" or not.....Might be of interest to some.

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Better odds for pro gamblers' business deductions
Tax Court rules Sec. 162(a) expenses can exceed gross receipts from wagers.
By Wei-Chih Chiang, DBA and Randy Reed, DBA
April 2012
Better odds for pro gamblers' business deductions

Recently, professional gamblers’ luck prevailed as the Tax Court changed directions on the deductibility of nonwagering business expenses. The Tax Court in Mayo (136 T.C. 81 (2011)) partially overruled its precedent, Offutt (16 T.C. 1214 (1951)).



Offutt allowed the deduction of wagering losses only to the extent of winnings and included professional gamblers’ nonwagering business expenses in the definition of losses. The Mayo court, contrary to Offutt and subsequent cases, allowed a professional gambler to deduct ordinary and necessary business expenses under Sec. 162(a), potentially in excess of gross receipts from gambling as a trade or business. In doing so, the court noted it was following recent IRS policy on the issue outlined in a 2009 IRS legal memorandum. Furthermore, in December 2011, the IRS acquiesced to the court’s holding and analysis (Action on Decision 2011-06).



PROFESSIONAL VS. CASUAL GAMBLERS

Historically, gamblers have had difficulty establishing themselves as members of a profession engaged in a trade or business of gambling. Most people gamble for pleasure. Some do so for profit, but those taxpayers historically have had problems defining their occupation. The Supreme Court in Groetzinger (480 U.S. 23 (1987)) said a gambling activity could be considered a trade or business if it is pursued full time, in good faith and with regularity, to make income for a living, and not merely as a hobby. Along the same lines, Sec. 183 denies deductions beyond income derived from any activity that is not a trade or business engaged in for profit—in other words, without a profit motive.



Naturally, the deductibility of a gambler’s costs depends on the tax status of the gambler as either a casual or professional gambler. A casual gambler can deduct gambling losses on Form 1040, Schedule A, Itemized Deductions, but only to the extent of winnings and cannot deduct associated expenses, which are nondeductible under Sec. 262 (AM 2008-013).



A professional gambler, on the other hand, who is engaged in the trade or business of gambling, is allowed to offset losses and expenses of gambling against income from it on Schedule C, Profit or Loss From Business (Sole Proprietorship). Among the requirements for being considered a professional gambler engaged in gambling as a trade or business, the profit motive requirement may easily cause a dispute with the IRS. To determine whether a profit motive exists, all facts and circumstances with respect to an activity should be taken into account. Regs. Sec. 1.183-2(b) provides nine factors:



1. The manner in which the taxpayer carries on the activity. If the taxpayer conducts gambling activities in a businesslike manner, such as maintaining complete books and records, this factor favors finding a profit motive.



2. The expertise of the taxpayer or his or her advisers. Preparing for gambling activities by extensive study and consulting with experts may indicate that the taxpayer has a profit objective.



3. The time and effort expended by the taxpayer in carrying on the activity. A taxpayer who devotes much time and effort to conducting gambling activities may thereby show an intention to make a profit.



4. The expectation that assets used in the activity may appreciate in value. This factor might not be applicable to gambling activities, since the assets involved usually are cash.



5. The success of the taxpayer in carrying on other activities. A taxpayer’s success in converting other nongambling business activities from unprofitable to profitable may indicate a profit motive for the gambling.



6. The taxpayer’s history of income or losses with respect to the activity. A history of substantial gambling losses may indicate that the taxpayer did not conduct the gambling activities for profit.



7. The amount of any occasional profits. A few large wins, however, can indicate a profit motive despite more routine losses of lesser amounts.



8. The taxpayer’s financial status. If a taxpayer does not have substantial income from nongambling activities, it may indicate that the taxpayer engages in gambling for profit.



9. The presence of elements of personal pleasure or recreation. Since gambling at a casino is commonly understood to be an amusement, a taxpayer has to show there is no pleasure in gambling (for example, no friends or family members accompanied the taxpayer).



This is a nonexclusive list, and none of these factors is determinative. The Tax Court in Chow (T.C. Memo. 2010-48) and Myers (T.C. Summ. 2007-194, discussed in “Tax Matters: A Hard Night at the Casino,” JofA, March 2008, page 69) applied these factors in deciding whether taxpayers were professional or casual gamblers.



WAGERING GAINS AND LOSSES

Although Sec. 162(a) allows a deduction for all ordinary and necessary expenses paid or incurred in carrying on a trade or business, Sec. 165(d) specifies that deductible losses from wagering transactions are limited to the gains from such transactions. In the past six decades, the Tax Court has generally followed the Offutt rule, under which courts have applied Sec. 165(d) to limit the deductibility of professional gamblers’ trade or business expenses.



In Offutt, the petitioner’s principal occupation and source of income was bookmaking and betting on horse races. He sought to claim and carry back a net loss from these activities against other income, arguing that, because gambling was his regular business, he should be treated differently from a taxpayer who undertook such activities for profit but only sporadically. The Tax Court noted that the predecessor statute to Sec. 165(d) (which contained identical language) made no such distinction and ruled against the taxpayer.



In practice, courts tended to interpret “wagering gains” as limited to “wagering winnings” but “wagering losses” as including nonwagering business expenses and limited to wagering gains. Nonwagering gains (for example, “take-offs,” or table fees paid by gamblers to a casino and sometimes passed along from the casino to an employee, who may also gamble) could not be used to offset wagering losses. Besides takeoffs, professional gamblers’ income sources not directly from their own wagering activities may include “tokes” (tips to casino dealers, sometimes in the form of bets placed by gamblers for their benefit) and “comps” (complimentary goods and services a casino provides gamblers). Courts have also addressed treatment of these income sources.



Take-offs. The taxpayer in Boyd (762 F.2d 1369 (9th Cir. 1985)) was a professional gambler managing a poker room in a casino. Under the contract with the casino, he participated in poker games with his own money to stimulate play. The casino gave him a portion of the take-offs as compensation. The IRS and the courts rejected Boyd’s attempt to offset his wagering losses against his take-off income. The Ninth Circuit noted that, because a takeoff is a fee, it is not gain from wagers entered into by the casino or the taxpayer. Therefore, Boyd was not allowed to offset wagering losses against his contractual share of the take-offs. The take-offs received by the taxpayer should be treated as ordinary income, the court said.



Tokes. The Tax Court in Bevers (26 T.C. 1218 (1956)) held that wagering tokes received by a dealer were gains from his labor as a dealer, not from wagering transactions. The court said that, if the taxpayer had been merely an observer and taken no active part in the games, he would not have received the tokes. Therefore, tokes are compensation for the recipient’s services and should be treated as ordinary income. Likewise, the Fifth Circuit in Allen (976 F.2d 975 (5th Cir. 1992)) concluded that a dealer receiving a wagering toke has not entered into a wagering transaction, since the dealer has no part in deciding to make the wager and stands to lose nothing from it.



Interestingly, a federal district court reached a different conclusion, although it was reversed on appeal (Olk, 388 F. Supp. 1108 (D. Nev. 1975), rev’d, 536 F.2d 876 (9th Cir. 1976)). The taxpayer in Olk was employed as a casino craps dealer. Dealers were forbidden to engage in unnecessary conversation with casino patrons and were required to treat all patrons equally. At the end of each shift, dealers divided their tokes evenly among them. Occasionally, players could give money to the dealers or place bets for them. The district court in Olk found that wagering tokes given to dealers were not incidents of their services, since the dealers functioned in an almost machinelike manner, making such tokes different from traditional tips for personal services. As a result, the court held that such tokes were nontaxable gifts. In reversing, the Ninth Circuit reasoned that the regularity, equal division and daily receipts of the tokes indicated that a reasonable dealer would view such receipts as a form of compensation for his or her services.



Comps. An exception to the narrow interpretation of wagering gains is comps. The taxpayer in Libutti (T.C. Memo. 1996-108) was allowed to include comps as a part of his wagering gains against which he could deduct his gambling losses. The Tax Court held that the comps were the taxpayer’s gains from wagering transactions because “winnings” is not the only meaning for the word “gains” in Sec. 165(d). Further, the court found that, although the taxpayer’s receipt of the comps was not directly related to the success or failure of his wagers, he received the comps incident to his direct participation in wagering transactions. Therefore, the relationship between the taxpayer’s comps and his wagering was “close, direct, evident, and strong,” such that the comps were sufficiently related to his gambling losses for the purposes of Sec. 165(d).



THE MAYO HOLDING AND ILLUSTRATIONS

Although the Tax Court in Mayo followed Offutt to limit allowable losses from wagering transactions to the extent of gains from such transactions, it held that it will no longer follow Offutt with respect to nonwagering expenses, for the following reasons: First, the Offutt court provided no reason to support its conclusion that “losses from wagering transactions” under Sec. 165(d) should include both the cost of losing wagers and business expenses incurred in gambling activities. Second, there is no support in Sec. 165(d) for applying it differently with respect to wagering losses versus gains. Third, the Ninth Circuit in Boyd distinguished wagering losses from expenses incidental to gambling, indicating that the nonwagering expenses would not necessarily be subject to Sec. 165(d). Last, the IRS in recent years has conceded the deductibility of professional gamblers’ business expenses in several cases (see, e.g., Crawford, T.C. Memo. 2010-54, and Tschetschot, T.C. Memo. 2007-38) and said in a chief counsel memorandum (AM 2008-013) that the Offutt rule would no longer be followed on this point.



The Tax Court’s holding in Mayo and the IRS’ acquiescence to it do not change the precedential perspectives on wagering gains. Rather, they merely confine the broad interpretations of “wagering losses” and make professional gamblers’ business expenses beyond wagering gains deductible. Based on examples in the chief counsel memorandum, different nonwagering gain items illustrate the Mayo rule in the following scenarios. Assume all of the gamblers in the scenarios qualify as professional gamblers and that they have no income other than that specified in the scenario.



Scenario 1. Andes worked in a casino as a card room manager and participated in poker games with his own money. In a tax year, Andes had total wagering gains of $100,000 and total wagering losses of $75,000 and incurred $15,000 in gambling-related business expenses for transportation, the deductible portion of meals, and table fees. Also, Andes received from the casino his contractual share of take-offs, $2,000. Andes had wagering net income of $25,000 (wagering gains of $100,000, minus wagering losses of $75,000). Andes may deduct business expenses of $15,000, resulting in net business income of $10,000. In addition, Andes should report the $2,000 in take-offs as ordinary income. Andes’ taxable income is $12,000.



Scenario 2. Cher worked in a casino as a dealer and also gambled there during her spare time. Cher had total wagering gains of $75,000 and total wagering losses of $100,000 and incurred $15,000 in gambling-related business expenses for transportation, the deductible portion of meals, and data fees. Also, Cher received tokes of $2,000 while working as a dealer. Cher could use her wagering losses to offset wagering gains up to $75,000. Her business expenses of $15,000 result in a business net loss of $15,000. Additionally, Cher should report ordinary income of $2,000 from tokes.



Scenario 3. Dennis traveled to various casinos and participated in poker tournaments. Dennis had total wagering winnings of $75,000 and total wagering losses of $100,000. He incurred $15,000 in gambling-related business expenses for transportation, the deductible portion of meals, and lodging. The casinos also provided Dennis comps worth $2,000. Dennis could use his wagering losses to offset his wagering winnings of $75,000 and comps of $2,000. His business expenses of $15,000 result in a business loss of $15,000. Consequently, Dennis has a loss of $15,000 from gambling activities.



CONCLUSION

Under the holding in Mayo and the IRS’ acquiescence to it, professional gamblers are allowed to fully deduct their nonwagering business expenses beyond wagering gains. Nonwagering business expenses may include transportation, meals and entertainment, admission, subscriptions and other fees. In addition, if nonwagering expenses exceed wagering gains and other income, they may give rise to a net operating loss that may be carried back to previous-year returns or carried forward to future-year returns. Professional gamblers still must substantiate the amount and the business purpose of the expenses to secure their deductibility (Presley, T.C. Memo. 1979-339).





EXECUTIVE SUMMARY



  The IRS acquiesced to the Tax Court’s recent holding that a professional gambler in the trade or business of gambling could deduct nonwagering expenses in excess of gambling winnings under Sec. 162(a).



  Historically, such costs in excess of gambling winnings have been disallowed under Sec. 165(d) and previous Tax Court precedent. Now, however, such deductions may offset other income and even result in a net operating loss that may be carried back or forward to other tax years.



  To be considered a professional gambler, taxpayers generally must demonstrate to the satisfaction of the IRS that they are engaged in gambling as a trade or business rather than casually. The IRS and courts apply nine factors in regulations under Sec. 183, as well as all relevant facts and circumstances, in making the determination.



  Nonwagering business expenses may include transportation, meals and entertainment, admission, subscriptions and other fees. Wagering gains include wagering winnings and “comps” (the fair market value of complimentary goods and services) but not additional income to casino personnel in the form of “take-offs” and “tokes,” which are likely to be considered compensation or other, nonwagering income.

In USA it appears that a gambling win is taxable income.....but proving you are a "professional gambler" entitling you to deductible tax expenses/losses from gambling is the difficult part!.
=================================================================================================



By Linda Stern

WASHINGTON | Wed Dec 28, 2011 3:29pm EST

(Reuters) - In the waning days of 2011, the federal government has handed gamblers two gifts. The Justice Department cleared the way for states to start legalizing online poker and other online betting games. And the Internal Revenue Service agreed to a tax court decision that will allow professional gamblers to take big tax losses.

Does that mean you can now write off all those Knicks games and bar nights you and your fantasy league buddies attend? What about the Vegas sprees that support your habit? Sorry, not so much.

"The tax code is very very very... and I could add many more 'verys'... unfair toward gambling," says Russell Fox, a Las Vegas tax expert who prepares the returns of poker aficionados, horse bettors, slots players and more. Fox is an enrolled agent -- a special class of tax preparer that qualifies him to represent clients before the Internal Revenue Service.

Fox and other analysts do believe that the administration's new position will eventually lead to many more legal games and gambling opportunities. "Maybe five years from now, you're going to see a number of new games online; many of them have yet to be invented," said Michael Pollock, managing director of Spectrum Gaming Group, a research and consulting firm.

But whether the people who spend money on those 'opportunities' can actually cash in on the tax breaks that might be associated with them is another question.

The main limitation, from Fox's point of view, is that the IRS distinguishes between recreational and professional gamblers -- and only pros can take lucrative tax losses for their expenses. The bar is higher for a professional gambler than it is for a professional painter, babysitter, dogwalker or eBay merchant, Fox suggests. And only the pros can take tax losses for their expenses.

Here's what you need to know if you enjoy the games of chance and want to save money on your taxes.

-- You can win, but you can't hide. "Gambling winnings are always taxable income," the IRS notes. That includes the $250 you get if you call the final four right in your office NCAA pool, and the amount you win when the players in your fantasy football team have a good week.

-- Pros get big write-offs. If you are deemed a professional gambler, you can deduct more than you make, producing losses that can reduce your tax bill significantly. Here's how: You're allowed to take as much in gambling losses (the actual amount you bet and lose) as you won. Then you can also deduct your expenses, such as travel costs, tournament fees and the like. If that results in a gambling business income that is a negative number, you can use that negative number to reduce any other taxable income you may have.

-- Of course, there's a catch. It's very hard to prove that your gambling activity is a business. As recently as July of this year, the U.S. tax court disallowed the claim of a taxpayer who spent much of his spare time playing the slots, winning $25,534 in the process. He claimed betting losses of that amount plus expenses of $15,455. But the tax court agreed with the IRS's claim that he wasn't really running a gambling business, largely because he had a day job as an X-ray technician that supported him, and because he wasn't running his gambling business in a businesslike manner. The IRS has a checklist of behaviors that it looks at to decide if something's a business, and having fun is on it. If you really enjoy gambling and have other income coming in, and don't keep good records, you're probably just going to be considered a recreational gambler, even if you recreate a lot, says Fox.

-- Hobbyist gamblers don't get the same breaks. If you win a bunch of money, but aren't a pro, you can only deduct your losses up to the amount that they zero out your winnings. And they appear in different places on your tax return, so anyone who doesn't itemize their deductions will lose out. You still have to take the income as taxable, but you'll lose the deductions.

-- The fantasy leagues are still operating in the grey. The good news for people who field their own fantasy football, basketball or baseball teams is this: It's usually legal to do so. The law, which regulates online gambling -- the Unlawful Internet Gambling Enforcement Act of 2006 -- specifically carves out fantasy leagues as a protected activity. But Florida has outlawed fantasy leagues. And whether they are businesses is a whole other question that doesn't seem to have been tested. Some fantasy players are getting 1099 forms listing their winnings. That enables them to reduce that taxable income by the amount they bet or spent on participating (as long as they don't create a loss.) But proving you are a professional fantasy sports player? "I seriously doubt it," says Fox. "You have to prove it's your livelihood, and that's hard to see."

-- Some states are better than others. Some states disallow gambling losses, or subject them to their state's alternative minimum tax rules. According to Fox, if you've got gambling income and losses, you probably don't want to be from Hawaii, New York, Ohio, Wisconsin, or a handful of other states, because they have various rules which either disallow gambling deductions or subject them to alternative minimum taxes, or add extra taxes onto gambling businesses. Of course Nevada's kind to those who play (or work) at gambling, so living in Las Vegas instead of traveling there may always be an option. At least you'll cut down on travel expenses.

USA article clarifies what gambling losses are deductible IF you prove you are a "professional gambler".....
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Proper Documentation is Necessary for Gambling Loss Deduction

Taxpayers can deduct gambling losses only to the extent of gambling gains. The courts have ruled that this limitation applies even if the taxpayer is in the trade or business of gambling. There is no distinction between professional gamblers and occasional, amateur gamblers when it comes to the deductibility of gambling losses. The losses need not be from the same type of gambling to offset winnings.
Gambling Losses for Professional Gamblers

If you gamble for your livelihood and are treated as being in the trade or business of gambling, you report winnings and losses on Schedule C, but can only claim losses to the extent of winnings. However, the activity as a whole cannot generate a loss for the taxpayer. Any excess gambling losses over gambling winnings cannot be carried forward or carried back to offset gambling winnings from other tax years. These excesses are abandoned. The Tax Court has also ruled that the value of complimentary rooms, vacations, and other gifts a casino provides a taxpayer must be reported as taxable income but can be included in gambling gains and offset by allowable gambling losses.
Gambling Losses for Non Professional Gamblers

For the non professional gambler, the Tax Court has generally held that only the cost of a wagering transaction is treated as a gambling loss. Additional expenses to engage in wagering are not gambling losses. Thus, expenses for travel, meals, and lodging do not qualify as gambling losses. Unless the taxpayer is a professional gambler, these additional expenses generally are treated as nondeductible, personal expenses because amateur gamblers do not have a bona fide expectation of profit, given how the odds are known to favor the house. Further, such expenses cannot be deducted as Section 183 hobby expenses because such travel expenses are typically considered personal, and the regulations thereunder do not provide an exception for hobby-related travel expenses.

Find out how our expertise in Tax Services can add value to your business. Email us or call us at 1 (888) 875-9770.
Documenting Gambling Losses

Adequate documentation is required to claim gambling losses. If you have a Player’s Club Card and use it while gambling at a Casino, you can request a Win/Loss statement. This statement summarizes all of your tracked gaming activity and provides you with a net win/loss figure. For any large jackpots that you might have won, you can receive a W-2G statement from the payee, which will provide you with the taxable jackpot figure/form to file with your year end taxes. Both of the above mentioned requests must be made in writing.

If you do not have the above information, the IRS has stated that gamblers claiming losses must keep an accurate diary or similar record that contains at least the following information:

    The date and type of specific wager or wagering activity.
    The name and address or location of the gambling establishment.
    The names of other persons (if any) present with the taxpayer at the gambling establishment.
    The amount won or lost.

For example, wagering on table games (twenty-one, poker, roulette, etc.) may be substantiated by the number of the table played and casino credit card data indicating where credit was issued. For lotteries, a record of ticket purchases, dates, winnings and losses, as well as supplemental records such as unredeemed tickets, payment slips, and winning statements help document the activity.

The courts have been somewhat less restrictive in documentation for gambling losses. If sufficient evidence exists that a taxpayer incurred a gambling loss, the courts have allowed deductions where the taxpayer can estimate a loss despite lack of substantiation. In many cases, however, the courts have disallowed all of a taxpayer’s gambling losses for lack of documentation or support. The Tax Court has stipulated that the taxpayer must have evidence to corroborate the assertion that race tickets represent losses sustained by the taxpayer. A race ticket alone is not adequate substantiation.

Oh boy.Decironman really has got  a "bee in his bonnet".Can't see the relevance of all this USA info. to the original discussion,or do you just enjoy scaremongering ?

Dec 27, 2012 -- 6:42PM, DFCIRONMAN wrote:

They are carrying on an activity where the odds are in their favour.It seems obvious to me this means they FIRST must be profitable......not incurring losses which would indicate they did not have an activity where the odds were in their favour!

You still haven't understood that the case law is based on the behaviour and not on results.  Even if results were to be considered, it would be in the context of the activity - the majority of bookmakers win over a period/the majority of punters lose, the majority of casinos win over a period/the majority of punters lose and the majority of Betfair customers lose over a period.  Your lol quotation of material from the US (where all gambling winnings are taxable!) shows that you still don't understand that in the UK the activity must be a trade, profession or vocation to be taxable.  HMRC know that the majority of Betfair customers lose and know that it is impossible to make a case (solely on the result of the activity) that the winners are trading and the losers are not.  It is possible that some activities on the exchange like large scale marketmaking with a margin are in fact effectively bookmaking and quite likely to be adjudged as trading, but I can't see how many other exchange activities could be regarded as a trade when their success relies entirely on luck or the ineptness of others and the majority carrying out the activity lose money.

dave1357 - You say I " still haven't understood that the case law is based on the behaviour and not on results."

It appears to me that the last sentence of BM22018...."They are carrying on an activity where the odds are in their favour."..... implies that there has to be PROFIT in such a situation. Without there being a PROFIT in a tax year then no offset of losses would be accepted.

The USA legislation makes this clear as stated in the above article -

"If you gamble for your livelihood and are treated as being in the trade or business of gambling, you report winnings and losses on Schedule C, but can only claim losses to the extent of winnings. However, the activity as a whole cannot generate a loss for the taxpayer. Any excess gambling losses over gambling winnings cannot be carried forward or carried back to offset gambling winnings from other tax years. These excesses are abandoned.

All I am saying is that USA has such legislation and BIM22018 still leaves door open in UK IMO.

The 9 circumstances set out in article above are pertinent to IRS operations.....and should give food for thought (hard to digest after Xmas food!!!) to those who might be concerned re UK doing similar legislation.

I am only being Devil's Advocate......and naturally I want current status quo to continue in UK.

With "Self-Assessment" in UK.....it is up to every individual to take their own circumstances into account when completing return.

Just my opinion re the possibility of BIM22018 being used in future..........hope I'm "wrong"!

GL with bets.

Manuel please try to understand before one of us dies

It is irrelevant whether the activity is profitable.  There are poker players in the Victoria Casino who have made profits every year for decades.  The courts have said they are not carrying out a trade profession or vocation.  They do not pay tax.  If one of these players opened up his own club and played in a game which was raked, all his profits would be taxable.  Why is this? Because in the first case they are just playing cards against others doing the same with some winning and losing and they happen to win.  In the second case they are no longer a just card player - they are inviting cardplayers to their business with a view to making a profit.


Also you are embarrassing yourself by posting anything relating to a foreign country in this topic, it is utterly irrelevant.

It is irrelevant whether the activity is profitable.
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Also you are embarrassing yourself by posting anything relating to a foreign country in this topic, it is utterly irrelevant.

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You believe it is "irrelevant"..................I disagree.

However, it is down to interpretation of "They are carrying on an activity where the odds are in their favour."........

It is certainly "relevant" that if someone is making only LOSSES from gambling, then they don't come under BIM22018. They must be making PROFIT first before they can possibly fall into the BIM22018 category.......this is highly relevant.

The USA articles indicate 9 factors that the IRS there weigh up when deciding whether someone is a "professional gambler" or not........Such factors are "relevant" whether you disagree or not, and are likely to be how HMR&C will also view this topic should they ever take a case on.

So Basil......me tink you should go for a lie down now as you usually need one in every sketch!

Cheers the noooooooooooooooooooooooooooooooooo

The USA articles indicate 9 factors that the IRS there weigh up when deciding whether someone is a "professional gambler" or not........Such factors are "relevant" whether you disagree or not, and are likely to be how HMR&C will also view this topic should they ever take a case on. No it isn't.  Gamblers in the UK can tick all the US "progambler" boxes and it won't matter one bit

This is a nonexclusive list, and none of these factors is determinative.

Not just the 9 factors to be considered......each individual will be weighed up on their circumstances.....

So if in future HMR&C do decide to make an excursion into those who may come under BIM22018.......you still believe they won't use the 9 factors + others when considering who to check out.

I did state "should they ever take a case on.".......so ignoring such factors is just putting heid in sand.

Anyway we clearly disagree re the possibility HMR&C might pursue cases under legislation and BIM22018......if they do decide to do so, then more legislation would be forthcoming, and probably along lines of USA legislation.

So you are quite entitled to hold your opinion, as I am to hold my opinion........and no point of further posts from me. Though I suspect you may well do so.

GL and all best for your future punting.

then more legislation would be forthcoming, and probably along lines of USA legislation.  Yeah that would be the thing - throw out decades of tax law and copy the us system. Tax avoidance lawyers would be having multiple orgasms for years.

i cant see the relevance of the USA stuff either,i'm sure its well intentioned but is of no use to us brits.

It'd be nice if someone could answer callataxis assertion that he wouldnt be entitled to the full state pension as a result of self employed,voluntary NI contributions,i think that is actually relevant to many people!

callataxi     26 Dec 12 09:06 
swiftynifty 31 Oct 12 22:22 Joined: 16 Jan 07 | Topic/replies: 893 | Blogger: swiftynifty's blog
NI is optional unless you are registered as self-employed in which case you pay voluntary contributions, it's around £130 a year now. It keeps you in the system!


yeh thats pretty much what ive done for the past 6 years. out of interest will this entitle me to the standard

old age pension as well? a few people have said to me that as im not paying the "going rate" of someone in normal

employment then hard to see how i would qualify.

I am registered with the Revenue as a self-employed translator, and up to 1990 that was what I did for a living. By the end of that year I was winning enough going racing every day to stop taking on any more work. After a couple of years my accountant received a query as to my situation. He informed the Revenue that I was winning money backing horses, and there was consequently no taxable income to declare. We would inform the Revenue if the situation changed.

The Revenue were happy with that and, technically, I'm still a self-employed translator to this day. I just haven't taken any work for the last 22 years.

My accountant advised me to continue paying NI contributions for my pension, taking advantage of the ultra-low voluntary rate available to the self-employed.

It did occur to me that eventually someone at the Dept of Pensions might look at my lack of taxable income and decide I was no longer eligible for self-employed status or these low, voluntary payments, but about 5 years ago, out of the blue, I received a letter indicating that my contributions, if continued for the necessary number of years, would indeed make me eligible for a full state pension.

I'm not taking it for granted. I'm still assuming the worst and, should I make it to retirement day, would not be at all surprised to find I'm in fact due nothing.

But, as things stand, I have a piece of paper stating that these voluntary contributions (currently about £11/month) do indeed mean I should get the full state pension.

Thank you screaming!

It has got to be one of the best deals in the history of the welfare state:
Declare yourself self-employed and declare profits of 7605 a year or less, ( and claim those fancy Gordon Broon tax credits to boot )
Pay NI Class 2 contributions of £2.65 a week for 30 years.
At age 65 ( if male, single, and retiring today ) collect your £107 a week state pension, and go live in Burma or Vietnam, and expect to live another 21 years or so.
The deal is even better if you're a doll, retire at 61.5 ( today ) and live till aged 84 or thereabouts, but beetches have always bested the men when it comes to benefits.

No wonder the government is flat broke, spending £1.20 for every £1 it collects in taxes and desperately trying to find ways to balance the books, and they're unwilling to touch the old people, like they have some sort of sacred status as v-v-v-vulnerable people. Awww, the poor darlings.

Just one thing, voluntary contributions are charged at a far higher rate than self employed contributions. There's nothing voluntary about self employed contributions for most self employed (unless you have a low earnings exemption certificate) they're compulsory and paid as both class 2 (£2.65 per week) and class 4 (9% of your profit). Class 4 is just another name for additional income tax, but government can make income tax appear lower by calling the 9% tax something else. Only class 2 NIC's count towards a pension.

If you choose to pay voluntary contributions the rate is a rip off £13.25 per week, and qualifies you for pension and bereavement benefits but not employment benefits.

Yes. You're absolutely right, Trevh. It's NOT the voluntary NI contributions I pay as self-employed, but the standard, £11/month ones. The voluntary ones are, as you say, far higher.

It's just that I could, if I chose, cease to pay them, having no declarable income, so I think of them as voluntary. Apologies for the confusion.

By the way, I dug out the letter I received from the Pensions Service stating that I was eligible for a full pension as long as I continued paying these contributions. It's dated 26 Sept. 2003 (rather than the approx. 5 years ago that I remembered it).

I don't know whether declaring yourself as self-employed is quite that straightforward, bongo. When I first registered with my accountant in the 1980s, his work was littered with cases of people facing huge demands from the Revenue after declaring themselves self-employed when they weren't. I got to know him through a colleague who had been doing uncontracted translation work for one single firm for a number of years and had been enjoying the advantages of self-employment, while the Revenue insisted he was effectively an employee of that firm. He had been facing frightening demands.

I know nothing about Tax Credits. Would they be readily available to someone with no declarable income for 22 years? I've never claimed any benefits, mainly because I'm too lazy to face the hassle, but partly because I'm happy with the current tax situation and would rather let sleeping dogs lie.

You're right screaming - you can't just declare yourself self-employed if you're not - I made it sound too easy.
You should be working, meaning putting in the required hours doing remunerative work, or work which is intended to be profitable now or eventually to get the WTC part of tax credits. Having a trade which isn't currently being used, or a dormant business, doesn't get you tax credits if the revenue investigate.

I still think the £11/month contributions are a great deal for the genuinely self-employed, even more so for the girls, provided you can get to retirement age and enjoy it.

You are right people, you cannot simply declare yourself as self employed.

There was somebody on here a while back, a carpenter iirc who conjures up a fictitious forestry business purely, so it seemed, so he can pay Class 2 & Class 4 NI.   That is called evasion and sometimes R&C make examples of such people.

so just to clarify, if all i do is pay the £12ish ni contributions every month and just stay a full time gambler

as i currently am, then i receive the full old age pension?

Yes that's correct as far as I'm aware Callataxi, providing you've paid your fair share up until now or you'll receive a reduced pension.

Shirleyknot, you're referring to me. Yes you can declare yourself self employed if you earn more than 1p per year in your business, there's nothing dishonest or fraudulent about it, what is the alternative?

I did not "conjure up a fictitious forestry business" in order to pay NIC's, you should get your facts straight please.

I've been self employed all of my working life, the "fictitious forestry business" was set up in order to grow and sell christmas trees as a side line, and when I last checked the trees were definitely real, rather soggy but real.

Bongo : No wonder the government is flat broke, spending £1.20 for every £1 it collects in taxes and desperately trying to find ways to balance the books, and they're unwilling to touch the old people, like they have some sort of sacred status as v-v-v-vulnerable people. Awww, the poor darlings.

If the government is "flat broke" it's mostly because of the almighty mess they inherited from Labour.

The majority of the elderly have worked and contributed most of their lives, I for one have no qualms about paying taxes to support them, and unlike you by the sound of it, I have much respect for the elderly. Many will be falling into fuel poverty though, due to ridiculous and pointless green taxes the government has signed us up to, but that's another story.

Trev - To state "the almighty mess they inherited from Labour" ......implies that Labour was to blame for the financial crisis.

The main reason for the financial crisis was down to "greed" by individuals borrowing beyond their means to buy property as "investment" with the expectation that the capital growth would enable them to profit on the "investment".

This "greed" was the driving factor and combined with the financial institutions not carrying out sufficient checks on such individuals and taking on such clients, then the financial institutions had Balance Sheets using accounting policies that were "flawed".

The professions...accountancy, legal and surveying mainly.......did nothing but turn a blind eye to such practices and "greed". They took their fees and sat back allowing the inevitable to happen.

Labour , as well as other political parties in Western world, were then faced with the collapse of some financial institutions and acted in a way that prevented total collapse in such markets. Had labour not acted the way they did, then we would be facing far worse a financial position than exists today!

The current financial position.......a triple dip looming up.....is totally down to the Conservatives and Liberal parties. They were warned by the retiring Labour Chancellor of Exchequer that the policies they had would lead to a "double dip" recession.......and this is what happened.

As the current government have not taken sufficient action to stimulate the economy, then the "triple dip" recession is now forecast by some economists.

I agree with the general gist of your above post re elderly ......but totally disagree re your blinkered implied view re Labour being to blame for the "mess"!

GL with bets.....

A majority of a majority is quite often a minority.

A politician recently highlighted that in the last 5 years private sector pay had risen 12%, and jobless benefits 20% and said 'benefits should no longer automatically increase with inflation'.
He didn't mention benefits for old people though ( which have gone up even more ) - oh no, you don't want to bring attention to their free holidays and >RPI pension rises - because they are such a massive voting bloc and you're seen as evil if you talk about anything that affects their money.

Of course the level of private sector pay is well higher than the level of jobless benefits....and that latest STAT re 12% and 20% is just another politically biased piece of information.

The fact the Conservative Party use such a STAT just indicates how ignorant they are and how biased they are re their views on economics and politics.