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HMRC internal manual

VAT Betting and Gaming Guidance

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HM Revenue & Customs
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Lotteries: what is a lottery?: definition of a lottery

There is no definition of the term ‘lottery’ in VAT law and its interpretation has previously been obtained from case law (Readers Digest Association Ltd. v. Williams ([1976] 1 WLR p.1109). However, following enactment of the Gambling Act 2005, and section 14 in particular, we accept that this statutory definition is appropriate for VAT purposes. In brief, it defines a lottery as an arrangement whereby: (a) persons are required to pay in order to participate in the arrangement; (b) in the course of the arrangement one or more prizes are allocated to one or more members of a class; and (c) the prizes are allocated by a process (or the first of a series of processes) which relies wholly on chance.

When a lottery is genuinely free and participants have provided no consideration in order to take part, it is still correct to refer to the scheme as a ‘lottery’ where the other two requirements are satisfied.