McMillan – Gambling proceeds not taxable income

18 March 2020

In McMillan v HMRC [2020] UKFTT 0082 (TC), the First-tier Tribunal (FTT) held that proceeds of gambling were not taxable income.


Mr McMillan (the appellant) was an active gambler from 1998 to 2010 and was not employment or engaged in a trade during this period.

The appellant's gambling took the form of an elaborate system of betting on football results and, increasingly, higher stakes in private poker games. These dealings were all in cash and no records of any winnings or losses were maintained by the appellant.

After 2010, the appellant deposited the money he had won over the period in various bank accounts which he had opened.

On 5 February 2018, HMRC issued eight assessments, pursuant to section 29, Taxes Management Act 1970 (TMA) for the tax years 2006/07 to 2013/14, inclusive, in the total sum of £290,928.56.

On 6 February 2018, HMRC issued related failure to notify penalties in the total sum of £132,193.25.

The appellant had not filed any tax returns for the above years, nor had HMRC issued a notice to file a return under section 8, TMA.

The appellant appealed to the FTT.

FTT decision

The appeals were allowed.

The FTT noted that although the gambling methods used by the appellant were beyond the skill or sophistication of the average sports gambler, the appellant's gambling did not amount to a trade and, as such, his winnings were not taxable. Although the appellant's bank deposits were in substantial sums and this invited further investigation, on the evidence available, there was no proper inference to be drawn that the appellant was carrying on a trade.

The Tribunal therefore concluded that the appellant had no taxable income source for any of the periods for which the assessments under appeal were issued.


The appellant in this case was able to provide a detailed and credible explanation of the careful research and calculation he used for his gambling system. Although certain elements of the case seemed implausible at first, they were corroborated by appropriate evidence. This decision illustrates the importance of thorough case preparation in order to establish the relevant facts relied upon at the appeal hearing. The FTT accepted in full the evidence given by the appellant and on his behalf.

The case is also interesting for what was revealed at para [4] of the decision:

"HMRC had inadvertently disclosed a review letter dated 11 April 2018 (not sent to the Appellant) in which the review officer had concluded that all of the assessment and penalty determinations should be cancelled because HMRC had failed to identify a taxable source. The review letter which was in fact sent, dated 16 April 2018, from the same review officer, stated that the assessments and penalties should be upheld.

It is not evident from the decision why the review officer changed his position and one is left to speculate as to why he had a change of heart. One thing is clear, the above will do little to displace the concerns of those taxpayers and practitioners who consider HMRC's review process to be little more than a 'rubber stamping' exercise.

The decision can be viewed here.

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