I have been approached by a potential client who is a professional gambler. He gambles on his own behalf which I had always thought to be exempt from income tax.
However he also gambles on behalf of others and receives a commission. Would that qualify as self employment?
Any opinions and views would be very much appreciated.
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Sounds like taxable income to me. He is not gambling himself, rather receiving a no-win, no fee commission.
Careful
He needs to be careful to keep good records (including where & how much he bets for whom, how much he receives & how much he pays back).
He sounds like an ideal person to know if you want to launder proceeds of drug trafficking etc.
If he gambles at casinos then they will have detailed records of when he attends, how much he bets, etc. In the event of an investigation his records need to tie up with the records the police would get from the casino.
David
Hi
I believe that the gambler is playing "staked" as it is the term in poker. The fish pays the shark to pay on his / her behalf.
I think that the ultimate beneficiary of the gambling wins is irrelevant. The success rate of the gambler is irrelevant. The gambling as an activity does not normally amount to trading. Therefore, as long as the money comes from gambling as an activity, it is not taxed.
However, professional gamblers have to pay income tax on some activities that are connected to gambling such as sponsorship contracts or appearances in television shows.
See Graham v Green [1925] 9TC309
Curious
If he is that good, why on earth would he be content to take a commission for gambling on another's behalf?
As an aside met a successful gambler on a cruise. At the casino I innocently said to him, 'I'd better just copy what you do.' He looked at me coldly and said, 'No. If you try to, I will walk away.'
I maybe misunderstand the arrangement. Does the "gambler" stand to lose? I assume he is paid commission on winnings but doesn't risk a loss if he has a bad run. If that is the case, can his earnings be treated as gambling winnings? If so, they may be derived from gambling but surely represent earnings from allowing someone the benefit of his skills and knowledge.
I agree this should be non-taxable
As otherwise you could potentially claim tax relief for your losses (this is the main reason gambling is a non-taxable activity as of course most people lose).
Staking/backing is reasonably common in poker in both tournament and cash games. A backed player would be given a certain amount of money to play set games and would be entitled to a percentage of the winnings (assuming there are any) generally after the stake has been repaid.
the backer would receive his % of winnings which I guess could be called commission at a push.
As far as I am aware that would tax free as it is gambling, there is certainly no scope for offsetting losses.
It does I expect happen in relation to horse racing/bookies but would tend to be where the backer is banned by the bookies (for winning to much) and any gambling then would be controlled by backer.
You would not expect to see it in casino games as the only winner there is the casino!
As I said
As far as I am aware that would tax free as it is gambling, there is certainly no scope for offsetting losses.
As I said, if the player stands to get some commission or none, I would have thought that a basic characteristic of gambling, being the risk of loss, was absent.
I know of a few gamblers ...
... who are so successful that the main online bookmakers will no longer accept their bets. So they have to register under another name, but that name must have a credit card attached to it.
So they get a few friends, who have their own credit cards, to set up online accounts with the bookies, and then the "pro" spreads his bets around them so that each individual remains under the radar. For their inconvenience they get a small reward.
I agree that the friends need to keep good records. The commission is taxable, in my view, but I would not have said that it amounts to a trade.
With kind regards
Clint Westwood
But
If I find a way to hedge my spread bet positions in clever way so that I cannot lose, that would still be tax-free gambling, so I think the fact that you cannot lose (if it's done legally) is not in itself sufficient to cause a problem here, but I am happy to be proved wrong with any relevant case law or legislation. Also, there could be a partnership, so that losses could arise in the partnership (but are borne by just one partner).
Gambling partnership?
. Also, there could be a partnership, so that losses could arise in the partnership (but are borne by just one partner).
But could a gambling partnership even exist as under the Partnership Act 1890 as the partnership has to involve 'carrying on a business'.
"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." Evans v FCT [1989] 20ATR922, 89ATC4540
Presumably
If I find a way to hedge my spread bet positions in clever way so that I cannot lose, that would still be tax-free gambling, so I think the fact that you cannot lose (if it's done legally) is not in itself sufficient to cause a problem here, but I am happy to be proved wrong with any relevant case law or legislation. Also, there could be a partnership, so that losses could arise in the partnership (but are borne by just one partner).
Presumably, in that scenario there are individual bets each of which gives rise to a gain or loss and it is only the net result that "guarantees" no total loss will arise. The OP (as I understand it) envisages a number of single bets being placed, none of which exposes the "player" (as opposed to the "backer") to the risk of loss but does give the opportunity for gain. That seems an entirely different set of circumstances. In the OP's case, it looks as if someone is selling his skill for a contingent fee. He isn't at any risk of loss if he plays once or 100 times.
Hi
Gambling as an activity does not amount to trading, regardless of who does the activity and their experience / skills.
No risk
Gambling as an activity does not amount to trading, regardless of who does the activity and their experience / skills.
No risk; no gamble (by the player). Simple as that.
If I advise a firm of builders and they pay me, that income is my fee for services, not profits from a building trade I carry on.
In fact, suppose the player in the OP's question didn't sit at the table but rather gave the "backer" (who is at the table) advice through a hidden earpiece, seeing the cards through a James Bond style camera hidden in the backer's spectacles. Would the player be gambling? Of course not.
I supposed if the player was playing, he acts as an agent - and receives a fee for that service.
But
Re agents, quis facit per alium facit per se - what an agent does on behalf of the principal is done by the principal. There is clearly a decent nil tax filing position here and he can always disclose in the white space of his tax return if he is concerned at all re potential penalties. BTW, where is Portia to tell us all the right answer?