Newcastle and Hexham’s Specialist Children’s lawyer with Major Family Law, Lucinda Connell reports does money received from gambling wins constitute taxable income for child maintenance purposes?
The short answer to this question is that income from gambling, unless in the course of work as a bookmaker or gambling club or casino, whether online or not is not income from gainful employment and should not form part of any assessment or benefit.
The answer follows the decisions made in the recent case of Hakki v Secretary of State for Work and Pensions [2014] EWCA Civ 530, [2014] All ER (D) 05 (May). The significant question to be decided by the Court was whether the definition of self-employed earner for the purposes of the child support regulations was wider than that within the tax acts? In particular was a gambler whose sole means of support was the playing of poker said to be involved in a ‘trade, business, profession or vocation’ for the purposes of social security and child support?
As indicated above, with regard to the scope of trade and ‘earnings’ in the child support context, it was held that earnings means the same in a tax context as it does in a social security context. Therefore the general rule of thumb is that if it is not taxable then it is not income for the purposes of child support. There are some exceptions to this rule and, as the Court of Appeal stated in Hakki v SSDWP, there are provisions for the making of assessments based on the disparity between income and lifestyle.
The case itself is an interesting one. Amongst other points, the respondent, Mrs Blair, sought to persuade the Court of Appeal that the degree of organisation that Mr Hakki exhibited in his poker playing was an organised seeking of emoluments. Mr Hakki and the Secretary of State for the Department for Work and Pensions (SSDWP) were of the view that his poker playing fell far short of that. This was ultimately a position with which the Court of Appeal agreed.
The judgement reached in this case is an important one. Had Mr Hakki failed in his appeal, then there was a real risk that potentially millions of gamblers might have been sucked into having to pay national insurance contribution as self-employed earners and as a consequence those same gamblers would then have become entitled to pension and other social security benefits on their gambling. It was contended by the SSDWP that there could potentially be a huge resources requirement in the event that they had to enforce a new national insurance regime.
Further, all gambling winnings could have been taxable as earnings from self-employment and all gambling losses could be capable of offset against other non-gambling earnings from self-employment. Given that most punters lose long term and the winners are bookmakers and casinos (whose earnings are already taxed) the potential loss to the exchequer could have been many millions and possibly even billions of pounds.
It is therefore unsurprising that, while not a party to the proceedings, HMRC’s officers were present at the hearing, advising counsel for the SSDWP.