I’ve recently seen several adverts for “house lotteries” in the UK (such as this one).
Sounds great in principle but can anyone tell me what the tax implications are?
Can you walk away with the property for £25, or will the Exchequor send you a bill for ££s once you move in?
(NB. Looking for UK responses initially, although interested to know how it’s handled in other nations.)
I am not a lawyer.
My understanding is that you pay tax on lottery winnings, which presumably includes the house at current market value.
I am not a lawyer, tax advisor or anything of the sort :dubious: but my understanding is that tax would not be due on something like this. The example linked to is not a lottery but a competition or game of skill as there is a question you have to answer (lotteries, except for those for charity or where the tickets are only sold to a private groups, are not actually legal) and in the UK “amateur” contestants are not liable for tax on prizes.
There was a previous threat on tax on prizes including a number of cites on this but my Google foo is weak today and I can’t find them again!
Should have said:
Tax is not payable on lottery winnings in the UK. If you win GBP 92 million on the Euro millions lottery this Friday - as a UK tax payer you keep it all 
From the FAQs:
:rolleyes:
I agree that the National Lottery is tax-free (the Government takes 12% of the prizefund instead).
However the Charitable Lottery Tax Relief: Gambling Act 2005 says:
Certain lotteries are exempt from tax when the profits accrue to a charity.
http://www.hmrc.gov.uk/budget2007/bn44.htm
Therefore some lotteries are taxed in the UK.
Yes, but all other lotteries are basically illegal, as MarcusF said, unless they are little things like church tombolas or something organised for your company’s Christmas party. Or the National Lottery, which is a special case.
It looks like the people running this “sell my house” lottery have consulted a lawyer and made sure that it is a game of skill, because the question that you are required to answer is not trivial (well, not unless you have access to Google and maybe 10 seconds of spare time. I don’t know if the UK Gaming Act has quite got its head round Google yet, though).
Anyway, I think what the OP may have been more interested in is, is this a legitimate way of dodging Stamp Duty (the tax levied on the purchase of a house, for the non-Brits still reading this, both of them).
That’s because it’s paid on the ticket you purchase.
The owners of the home linked in the OP originally wished to sell it for £950,000.
When the housing market went south they came up with the ‘competition’ idea. Their aim is to sell 46,000 tickets at £25 by 7 December for a return of £1.15 million. So far, 34,000 tickets have been sold. The owners say that if their target is reached, ‘the surplus will be used in part to pay the winner’s stamp duty and the expenses of running the raffle’. I’m guessing the surplus is £200,000 but it’s not made clear from the article in today’s Guardian, for which I am unable to find a link.
If the target revenue is not attained, the owners intend to draw a name out of a hat, or the software equivalent of a hat, for a cash prize amounting to the total sum collected minus 35% ‘to cover expenses’.
They can’t lose.
Yeah, I guess the stamp duty is payable regardless of how the new owner comes into possession of the property, so it can’t be about that. From that link, it sounds like they are sailing pretty close to the wind, when it comes to what is and what isn’t a lottery.
But the 35% expenses thing pushes it into “scam” territory, for me. Even if they don’t sell, they get 35% of punters’ money? That’s already nearly £300,000.
The draw for the house in the OP’s link has been postponed pending an investigation by the Gambling Commission.