Lottery Duty (Excise Notice 458)
Find out about Lottery Duty, how the duty is charged and who has to pay.
Overview
This notice explains:
- who has to account for Lottery Duty
- whether your lottery is liable to duty
- how you register, including the conditions you must comply with
- what records and accounts you must keep
- how to work out the duty and make returns and payments
In addition to Lottery Duty (which is under the management of HMRC), you must comply with social law (which is the responsibility of the Gambling Commission and National Lottery Commission).
Licences and law
The Gambling Act 2005 governs the operation of exempt lotteries and contains separate requirements for operating and premises licences. If you have any queries about this law or your licences, contact the:
The National Lottery etc Act 1993 governs promoters who are holders of a section 5 or section 6 licence to run the National Lottery.
If you have any queries about this law, contact the Gambling Commission.
What Lottery Duty is
Lottery Duty is a duty on taking a ticket or chance in a lottery that is promoted in the UK, unless specifically exempt. Most lotteries, except the National Lottery, are exempt from the duty.
Where a lottery is subject to Lottery Duty, it’s defined as a chargeable lottery.
Duty becomes due at the time the ticket or chance is taken. Special rules apply for games promoted under sections 5 and 6 of the National Lottery etc Act 1993.
Duty is due on the full price paid (or payable) for commissions, discounts and similar, before any expenses are deducted.
Find out the Excise Duty rates for Lottery Duty.
What Lottery Duty does not apply to
The Gambling Act 2005 states that all lotteries are unlawful, except certain specified lawful lotteries, which are exempt from duty. An unlawful lottery is chargeable with duty at the current rate. The requirement to pay Lottery Duty does not make the lottery lawful.
Lawful exempt lotteries listed within Schedule 11 of the Gambling Act 2005 are:
- incidental non-commercial lotteries (must be promoted wholly for a purpose other than private gain) – this covers charity fund raising events, such as:
- bazaars
- fetes
- sporting or athletic events
- dinners (lottery tickets sold at football club annual dinners)
- private lotteries (only members of the society, or people on the society’s premises, can take part)
- work lotteries (only people who work on the same premises can take part) – this covers events such as office sweepstakes and office party raffles
- residents lotteries (only people who live at the same premises may take part)
- customer lotteries (only customers at the business premises may take part)
- society lotteries (for the benefit of a non-commercial society, established and conducted for charitable purposes)
- participation or support in sport athletics cultural activities, or any other non-commercial purpose (other than private gain)
- local authority lotteries, promoted by local authorities (must comply with the licensing conditions, set out in sections 98 and 99 of the Gambling Act 2005)
When prize competitions are classified as lotteries
There are competitions which combine a mixture of skill and chance to win. If the element of chance becomes too great, the competition could be classified as a lottery. This is because, at a certain point, success does not substantially depend on skill.
If a competition is found to be a lottery and it does not fall within the exemptions to Lottery Duty (specified in section 24(4) of the Finance Act 1993), it’s likely to be regarded as a chargeable lottery.
Example
A competition requires participants to answer one or more questions, which most participants would get right. The names of participants who answer correctly are put into a draw to decide the winner.
Because winning relies substantially on chance, this competition would be classified as a lottery and would be charged at the normal rate or duty.
Registration
You should register as a lottery promoter if you’re responsible for the conduct of a lottery liable to Lottery Duty. Usually this will be the person responsible for paying out prizes.
You must register for Lottery Duty if you’re either:
- the section 5 licence holder (the body corporate licensed under section 5 of the National Lottery etc Act 1993, by the National Lottery Commission, to run the National Lottery)
- running a lottery that’s not exempt
You do not need to register if you’re a section 6 licence holder (a person or persons licensed under section 6 of the National Lottery etc Act 1993, by the National Lottery Commission, to promote or run lotteries for the National Lottery). This is because the section 5 holder should be registered.
The section 5 licence holder is responsible for payment of all duty on National Lottery games, but the section 6 licence holder (and those associated with lottery promotion) should be familiar with keeping records.
Any person who runs a chargeable lottery without being registered with HMRC is committing an offence. To register and stay registered, you must:
- hold a valid licence issued by the National Lottery Commission, if you’re a section 5 licence holder for the National Lottery
- give security for the duty if we ask you to do so
- comply with all our requirements to make your returns and payments on time (once registered)
We do not normally ask for security for duty, however we may ask if there is a risk to the revenue. You will be notified of this. Security can be given in the form of a cash deposit or a Guarantee with an approved Financial Institution.
If you fail to provide adequate security, we may cancel your registration. This will mean that you’ll no longer be able to promote chargeable lotteries. If you do, you’ll be committing an offence.
You must register as a lottery promoter at least 15 days before you intend to promote a chargeable lottery.
When your registration has been processed, you’ll be given a reference number, which you should quote whenever you contact us about Lottery Duty.
Report changes
You must tell HMRC about any changes which could affect your duty registration within 7 days. Changes you must tell us about include a change:
- to the name of promoter
- of address for correspondence
- of registered address
If you stop trading, contact the Gambling Duties Team as soon as you know your last day of trading.
If you fail to notify
You could be charged a penalty if you fail to notify us of your gaming business or of any business changes at the right time.
Find out more in Compliance checks: penalties for failure to notify.
The accounting period
This is a period of 4 or 5 weeks ending on the last Saturday of each month. If your accounting periods are different (for example, they end on last Sunday of each month), HMRC may let you vary the period covered by a return.
Non-standard accounting periods must cover 12 consecutive periods in a year, and no one period can cover more than 5 weeks. Each period does not need to be the same length.
If you want to adopt non-standard accounting periods, write to the Gambling Duties contact address at least 28 days before the first period starts:
HM Revenue and Customs
Excise Written Enquiries Team
United Kingdom
BX9 1GL
Your letter must confirm the dates of when each period starts and when the 12th period ends. It may only cover a 12-month period. To continue using non-standard accounting periods after this time, you must send a new letter at least 28 days before the next period starts.
If we cannot agree to your proposed alternative accounting periods, you’ll have to operate the normal accounting periods. Under the Finance Act 1994, you can appeal against our decision.
Returns and duty payment
You must submit a return at the end of each accounting period, using form BD600.
You must submit a return even if you’ve not carried out business during an accounting period. A single return covers all chargeable lotteries promoted by one promoter within the period of the return. In the case of the National Lottery, it covers all lotteries run by all section 6 licence holders within the period of the return.
This also applies in the case of tickets or chances, where, before it’s taken, it has determined if it will win (for example scratch cards).
HMRC must receive your return and payment no more than 13 days after the end of your accounting period. If the 13th day is a Saturday, Sunday or bank holiday, your return and payment must reach us by the last business day before the 13th day.
The promoter of the lottery usually pays the duty. However, for the National Lottery, the section 5 licence holder is responsible for payment of all duty on National Lottery games (including those promoted by section 6 licence holders).
If you do not follow the rules when making returns and payments, you may receive civil penalties. Read the law on Lottery Duty.
Correct a mistake on your return
HMRC can charge a penalty if either:
- your return or other tax document is inaccurate and as a result you do not pay enough duty
- you do not tell us a duty assessment we have sent to you is too low
Find more information about inaccuracy penalties and how to appeal.
If an error meant that you did not pay enough duty on a previous return, you should make an adjustment on your next return. Make sure you keep sufficient documentation to give a satisfactory audit trail. We may ask you to explain the adjustment.
If you’ve paid too much duty, you’ll need to make a claim in writing to the Gambling Duties Team.
Find more information in Excise Notice 212: statutory interest and repayment of overpaid Excise Duty.
Avoiding penalties
You can avoid a financial penalty by checking that you’ve given complete and accurate information on your return. If you’re aware you’ve made a mistake on your return, tell us as soon as possible. We’ll be able to reduce the penalty, in many cases to zero.
You have the right to appeal if we impose such a penalty.
For further information on penalties, read the Compliance checks factsheets: penalties.
Payment of Lottery Duty
HMRC accepts payment by a range of methods, but recommends you use either:
- BACS direct credit
- internet or phone banking
- CHAPS
For CHAPS, you’ll need to supply your bank or building society with the following details:
- sort code: 08-32-00
- account number: 12000911
- account name: HMRC GACA
- payment amount
- your Lottery Duty reference number
Direct Debit payment plans can be used to pay amounts up to a maximum of £20 million.
Where payment of Lottery Duty is deferred, it must be paid on or before the return due date, by either the:
- Clearing House Automated Payment System (CHAPS)
- Bankers Automated Clearing Services (BACS)
Whatever payment method you use, you must make sure you have enough funds in your account to satisfy payment.
If you make a payment electronically (without a return or remittance document), make sure that you endorse it with:
- your Lottery Duty reference number
- the reason for the payment
Find more information on paying Lottery Duty.
Who pays the duty
The promoter of the lottery normally pays the duty. However, for the National Lottery, the section 5 licence holder is responsible for payment of all duty on National Lottery games, including those promoted by section 6 licence holders.
If you do not pay what is due
If you fail to pay any duty due (full or in part), HMRC may order civil proceedings for recovery of the debt. Read the law on Lottery Duty.
We’ll normally pursue the lottery promoter responsible for promoting the lottery. But we also have powers to recover any unpaid amount from:
- sub-contractors, section 6 licence holders and agents involved in promoting a lottery
- anyone involved in any capacity in the management of a lottery
- anyone who has any degree of control over any of the proceeds of the lottery (this would include retailers who sell the tickets or chances)
- in the case of a body corporate, any director will be personally liable jointly and severally with that body corporate
If you’re licensed by the National Lottery Commission, we may inform them of the situation and ask them to review the renewal of your licence. We may also exchange information relating to lotteries and lottery promoters with the Director General of the National Lottery, the Department for National Heritage and the Gambling Commission.
We do not normally request security for duty, however we may ask if there’s a risk to the revenue. You will be notified of this.
How to work out what Lottery Duty is due
Duty is 12% of stake money:
- paid in the accounting period, before deduction of expenses (including commissions)
- payable, but not yet received, on any tickets or chances taken in the accounting period
You could be liable to Lottery Duty even before the lottery has closed or been drawn.
If you promote the National Lottery
Special rules apply if you’re the promoter of the section 5 National Lottery game. The duty is 12% of stake money:
- paid in the accounting period, before deduction of expenses (including commissions), for all draws which have taken place in that accounting period
- payable, but not yet received, on any tickets or chances taken against draws that have already taken place in the accounting period
Keeping records
You must keep suitable records to work out the duty due and to allow HMRC to check the duty. The law does not lay down the exact form records should take, but we have powers to say what form they must take if we consider this necessary.
Find out more information about the maintenance and production of accounts and records in Excise Notice 206: Revenue traders’ records or contact the Excise helpline.
The law on record keeping requirements
Under sections 118A and 118B of the Customs and Excise Management Act 1979, HMRC have the legal right to see and take copies of any records, accounts or other documents relating to the business. You must keep your records in a readily accessible format and must produce them to us when asked.
The Revenue Traders (Accounts and Records) Regulations 1992 covers all general record keeping requirements for any revenue trader dealing in financial transactions that are liable to excise duty. Regulation 6 gives us the legal power to include in a notice any additional records you must keep.
Records with the force of law
The rules in this section have the force of law under section 6 of the Revenue Traders (Accounts and Records) Regulations 1992.
These requirements are in addition to any that the Gambling Commission may require under your licence in respect of accounts and records.
Section 5 licence holders of the National Lottery
They must keep a record of:
- all section 6 licence holders promoting National Lottery games
- the total sales made by each vendor, in each game
- the duty due on those sales
All other lottery promoters
A promoter, in relation to a lottery, is the person responsible for the conduct of the lottery. Usually this will be the person to whom winners will look for payment of prizes.
They must:
- keep stock accounts showing the unique reference of pre-printed lottery tickets or chances (exclude tickets that are only printed at the point of sale):
- in stock
- taken from stock
- returned to stock
- destroyed
- sold
- make entries no later than 48 hours after the accountable event
- complete a duty account showing the build up to the total duty liability
Tickets and chances
All lottery tickets (or chances) in each lottery game must show a unique reference and their price.
You must give us at least 7 days notice before you destroy tickets or chances and include a list of all the unique references involved. We’ll let you know where to send this notification. At the end of 7 days, you may destroy them without further notice or formality.
If you’re a section 6 licence holder, the Gambling Commission may impose further restrictions as part of the licence conditions. You should contact the Gambling Commission before making any moves to dispose of or destroy unused tickets or chances.
Where to keep records and for how long
The way you store your records must:
- capture all the information on the document (front and back)
- allow the information to be presented to us in a readable format, if we need to see it
You’ll need to keep all records that relate to, or are used to compile your Lottery Duty accounts at your principal place of business.
Anyone concerned with the sale of lottery tickets should keep their lottery records at their main business address.
The following rule has the force of law made under Regulation 8 of the Revenue Traders (Accounts and Records) Regulations 1992.
Anyone involved in promoting a lottery or selling lottery tickets must preserve all records and accounts for a period of 4 years starting on the day this obligation arises.
Keeping records if your liability for duty changes
If you’re only occasionally liable for duty, you’re only required to keep these records during the time that you’re liable. You must keep records from the start of the accounting period in which you’re liable.
The law on Lottery Duty
Laws that may attract civil penalties
We may apply civil penalties under the following laws:
- section 9 of the Finance Act 1994 (civil penalties)
- Customs and Excise Management Act 1979
- Finance Act 1997
You may be liable to severe penalties, including imprisonment, for serious offences such as:
- fraudulent evasion of duty
- promoting lottery(or being knowingly involved in the promotion of lottery) which is, or may be, chargeable with Lottery Duty, without being registered with us
- making false declarations or returns
- obstructing our officers
It’s important you contact the Excise Helpline if there’s anything you’re unsure of.
Overlap with social regulatory law
Lottery Duty legislation determines the duty treatment. Gambling duties are classified as self-assessed taxes, meaning it is your responsibility to work out, notify and pay any duty due.
In certain circumstances, if HMRC give a ruling, you can rely on that ruling even if it’s later shown to be wrong. You cannot rely on an opinion or any guidance written by the social regulator, even if the opinion relates to an identical piece of legislation.
If you have queries about Lottery Duty, refer to HMRC guidance or contact the Gambling Duties Team.
Reviews and appeals
When HMRC gives you a decision, you will be told the reason for the decision and what you need to do if you disagree.
Within 30 days you can:
- send new information or arguments to the officer you’ve been dealing with
- have your case reviewed by a different officer
- have your case heard by an independent tribunal
A different officer from the one who made the decision will handle your review.
If you prefer to have an independent tribunal hear your case, you must write directly to the Tribunals Service. You need to send your appeal to the Tribunals Service within 30 days from the date on the decision letter.
Time limits to ask for a review
You must write to the person who sent you the decision letter within 30 days of the date on the letter. We’ll complete our review within 45 days (unless we agree another time with you).
Unless you go directly to the Tribunal Service before asking for a review, you cannot ask the Tribunal to hear your case until the 45 days (or the time we agreed with you) has expired, or until we’ve told you the outcome.
If you’re not satisfied with the outcome, you have 30 days from the date on the new decision letter to ask the Tribunal to hear your case.
If we cannot complete our review within 45 days (or the time we agreed with you), we’ll ask if you’re willing to agree to an extension. If you do not agree to an extension, the review is treated as one where the decision being reviewed is upheld.
What to include in a request for review
Your request should set out clearly:
- the full details of your case
- the reasons why you disagree with us
- any supporting documentation
You should also state what result you expect from our review.
If you do not want a review
You may appeal to the independent Tribunal. You need to send your appeal to the Tribunals Service within 30 days of the date on the decision letter.
More information
Find more information about reviews and appeals in factsheet HMRC1: HM Revenue and Customs decisions - what to do if you disagree.
You may also contact the Excise helpline.
VAT
There is no liability to VAT on the sale of a ticket or chance in the lottery.
Find out more about the VAT treatment of lotteries in Notice 701/29 Betting, gaming and lotteries.
Find out more about the VAT liability of commissions and expenses in Notice 700: the VAT guide.
More information and support
If you need general help and enquiries, contact the Gambling Duties Team.
If you would like to speak to someone in Welsh, Telephone: 0300 200 3705, Monday to Friday, 8am to 6pm.
All calls are charged at the local rate within the UK. Charges may differ for mobile phones.
Your rights and obligations
Read the HMRC Charter to find out what you can expect from HMRC and what we expect from you.
Help us improve this notice
If you have any feedback about this notice, write to:
Gambling Duties Team
Indirect Taxes
HM Revenue and Customs
Ralli Quays
3 Stanley Street
Salford
M60 9LA
You’ll need to include the full title of this notice. Do not include any personal or financial information like your VAT number.
Putting things right
If you’re unhappy with HMRC’s service, contact the person or office you’ve been dealing with and they’ll try to put things right.
If you’re still unhappy, find out how to complain to HMRC.
How HMRC uses your information
Find out how HMRC uses the information we hold about you.