30
May

Is professional gambling a trade?

A thought-provoking question that has been asked by one of our readers is whether professional gambling is a trade or not. The answer to this question might surprise you. According to HMRC and reinforced by a number of court cases is the answer that gambling is not a taxable trade. This answer holds even for a professional gambler who spends a significant amount of time building up their expertise and honing their skills.

This view is confirmed in HMRC’s Business Income Manual where HMRC says that ‘thefact that a taxpayer has a system by which they place their bets, or that they are sufficiently successful to earn a living by gambling does not make their activities a trade’.

The only caveat to HMRC’s guidance is the possibility that some ‘professional gamblers’ do carry on a trade, for example, where they receive appearance money for appearing on television programmes. In fact, a professional gambler has nothing to report to HMRC (unless he has other sources of income). However, we would still recommend keeping records of winnings (and losses) should you ever become the subject of an HMRC enquiry and be required to prove your source of income.

Planning note

This issue can also raise difficulties for a non-taxpayer. For example, it would be very difficult to obtain a mortgage or other type of loan from a mainstream financial lender. Gambling winnings in the UK are also tax-free regardless of whether it’s your main source of income or a simple hobby. Interestingly, the UK’s view is not common across the world and many other jurisdictions tax gambling winnings.

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30
May

Off-payroll working

The rules for individuals providing services to the public sector via an intermediary such as a personal service company (PSC) changed from April 2017. The new rules shift the responsibility for deciding whether the intermediaries’ legislation applies, known as IR35, from the intermediary itself to the public sector receiving the service. The public sector organisation receiving the services is ultimately held responsible for paying taxes and penalties where an error has occurred. HMRC estimates that they have raised an additional

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Payments in lieu of notice – an update

Since 6 April 2018, employers have been required to pay Income Tax and Class 1 National Insurance Contributions (NICs) on certain parts of termination payments made to employees whether or not these payments are contractual. The element that is liable to taxation is the amount of the termination payment that represents a payment in lieu of notice commonly referred to as ‘PILON’. The measure means that all PILONs rather than just contractual PILONs (as was historically the case) are treated as taxable earnings.

In addition, all employees are required to pay Income Tax and Class 1 NICs on the amount of basic pay that they would have received if they had worked their notice in full, even if they are not paid a contractual PILON. This means that the tax and NICs consequences are no longer dependent on how an employment contract is drafted or whether payments are structured in some other form, such as damages.

The changes apply to payments, or benefits received on, or after, 6 April 2018 in circumstances where the employment also ended on, or after, 6 April 2018. Foreign service relief on termination payments has also been removed for all UK residents, apart from seafarers from 6 April 2018.

If an employee is on gardening leave, then the payment for the period to the termination date cannot properly be described as made in lieu of notice as the employment continues to the termination date whether the employee works or not.

Planning note

The introduction of employer NICs on termination payments above

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