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Licensing

Q: Gaming fundraisers

Our theatre club's supporters organisation is planning to hold a money-raising raffle. As we are not a registered charity, do we need a gaming licence? Also, do we need to pay VAT on the proceeds, and can we use the money to pay for day-to-day expenses, including our Inland Revenue or VAT payments?

A: A raffle is just a particular type of 'lottery' of which the common law definition is "a distribution of prizes by lot or chance where the participators make payment to secure a chance of winning". The law relating to lotteries in its application to your question is complicated. I will endeavour to summarise it for you in the limited space available, but inevitably some details will be lost in the process.

We start with the basic principle that, under the Lotteries & Amusements Act 1976, all lotteries are unlawful with certain specified exemptions. Disregarding the exemptions which have no relevance to your case, those which may possibly apply are as follows.

First, there is exemption for 'small lotteries' which are incidental to 'an exempt entertainment' such as a bazaar, fete, dinner, sporting event or other entertainment attraction of a similar nature. No registration or licence is required in such a case but there are certain conditions, such as that neither the proceeds of the raffle (after deduction of certain specific expenses) nor the entertainment to which it relates are to be used for purposes of private gain, that the lottery tickets are sold only on the premises at which the exempt entertainment is held and during the course of that entertainment that no more than £250 is spent on buying prizes and that no money prizes are awarded. No licence or registration is required for a small lottery.

Secondly, there is total exemption without licensing or registration for a 'private lottery' where the sale of tickets is confined to members of one society or club or organisation which is not itself set up for gaming or lottery purposes so that the lottery is merely ancillary to its other activities. It applies also where the lottery is confined to persons all of whom work or reside in the same place. Again, certain conditions must be observed, such as the whole of the proceeds after expenses must be used either for the purposes of the society or club or organisation concerned or the provision of prizes or both. No management fee must be paid and no advertisement exhibited outside the premises and no tickets sent through the post. The price of every entry must be the same.

The third category is a 'society lottery' promoted on behalf of a society established and conducted wholly, or mainly, for charitable purposes or for participation in or support of athletic sports or games or cultural activities or some other purpose which is not for private gain or for any commercial undertaking . If a lottery is neither a 'small lottery' nor a 'private lottery' as above, it must be registered with the local council before tickets are offered for sale, and the whole of the proceeds of the lottery, after deduction of expenses and cost of prizes, must be applied for the purposes of the society concerned. Furthermore, if the value of the lottery tickets on sale exceeds £20,000, or when added to sales from previous lotteries in the same year exceeds £250,000, the society must be registered with the Gaming Board.

You have not told me enough about your circumstances to enable me to advise, for certain, whether your proposed raffle will meet the conditions required for a small or private lottery - which I suspect to be the case, but, if not, it will very likely be a society lottery requiring registration with your local council. I doubt whether it will be big enough to require registration with the Gaming Board. No 'licence' is required in any event, but the exemption conditions do need to be observed if the raffle is to be lawful. I have indicated above the limited purposes for which the proceeds can be applied. There are percentage limits on the amount deductible from the proceeds for expenses and for expenditure on prizes - broadly 35 per cent on expenses, and 80 per cent on aggregate of expenses, plus prizes, where lottery proceeds do not exceed £20,000.

Turning to the question of VAT, lotteries are exempt supplies so no VAT is payable on sale of raffle tickets. If prizes are purchased from the sale, then VAT paid on the purchase of raffle prizes is a deductible expense from the raffle proceeds.

There is an excellent user-friendly booklet obtainable from the Gaming Board entitled Lotteries and the Law which I would recommend you to get if further detail is required.

First published September 1998