If you’re going to play the lottery as a group, one of the first things that you’ll want to do is to sign a lottery syndicate agreement. In the United Kingdom, income tax is not payable on lottery winnings. If you win the lottery and then give some of the money to other people, such as family or friends, tax will become payable on those payments. The only way to avoid that is by getting everyone you would want to share your money with to sign a syndicate agreement. This ensures that no tax has to be paid when the money is shared.
The lottery rules in the UK say that winnings have to be paid to one person, which is why a syndicate manager is assigned to manage and maintain the syndicate. In the event that a jackpot or other large amount of money is won, it will be paid to the manager of the syndicate, who can then transfer relevant amounts to the different people involved. Such agreements are recommended not just by the National Lottery, but also by the likes of the Health Lottery in order to ensure that there is a clear system in place for winners.
Playing The Lottery As A Syndicate
Whether you play the lottery with people from work, others in your family or a group of friends, organising a syndicate can be a good way to share the cost and also ensure that you get to spread the joy if you win. The good news is that you don’t need to get a licence or obtain permission in order to have a syndicate. What you do need to be careful of, though, is avoiding a situation in which the United Kingdom Gambling Commission thinks that you’re engaged in ‘promoting a lottery’, as in the Gambling Act of 2005.
Section 252 of the Gambling Act is what outlines what ‘promoting a lottery’ entails, but the main thing to note is that you need to have a syndicate agreement in place in order to avoid falling foul of the UKGC’s rules. Imagine a scenario in which you have decided to run a lottery syndicate at work and you get three colleagues involved. As the organiser, you collect the money and buy the tickets. If you were to win, the National Lottery would pay the winnings out to you. The fact that you’d agreed to share with the others isn’t relevant to the Lottery itself.
Their responsibility is simply to pay you the winnings The others would not have a direct claim to the prize money and without a syndicate agreement it is unlikely they would have much of a legal claim either. The syndicate agreement therefore protects all parties first and foremost as it presents a contractual agreement between all concerned. It also stops any tax having to be paid when the winnings are shared between you and your three work colleagues, thanks to the Gambling Commissions rules on tax for syndicate members.
How Syndicate Agreements Work
As you might imagine, there are any number of different ways that people might choose to split the money between each other when playing the lottery. You could have three people who take it in turns buying the ticket and splitting any winnings three ways, with one assigned the role of syndicate manager in order to be paid when you win. You might have four people who are married to each other, splitting the money 50/50. How you decide to run your syndicate is entirely up to you, with the main thing being that you have it written down.
You need to think carefully about all details around your syndicate. How often will you play? Which games are you buying tickets for? How many lines do you want? What happens if someone misses a payment? The best thing to do is to think trough all possible scenarios so that there is no confusion if and when you win money. There might be some who think you should re-invest small wins, whilst others might think you should still share them out, for example. Get all of it written out clearly in an official syndicate agreement that is given to the National Lottery.
If you want to be particularly belt-and-braces about your approach, you can get your syndicate agreement witnessed by a solicitor, doctor or other person of standing. You should also ensure that signed versions of the agreement is in the possession of all syndicate members. It is the best way of making sure that His Majesty’s Revenue & Customs doesn’t think that any transfer of money between people in the event of a win is a gift, which would then have tax due on it like Inheritance Tax, reducing any winnings that you would actually get.
When Syndicates Go Wrong
As you might imagine, there are no fallings out quite like those that happen between friends, family and colleagues when money is involved. As a result, there have been times over the years when people have fallen out because of disagreements over how money won on the lottery should be shared. One such example occurred in 2013 when Louisa Whitby was frozen out of receiving some of the £28 million that her work syndicate won. She was part of an 11-strong syndicate that won, but hadn’t been in work on the day the money was taken because she had morning sickness.
Rather than give her some winnings, losing £300,000 each, the other ten syndicate members decided to get £2.8 million per person. Whitby claims that she had offered to pay her part of the syndicate when she was back in work, but was turned down. Another example occurred at the DVLA in Swansea, where 16 people won £1 million. Three of them hadn’t paid their dues, however, leading to a wrangle that made the papers. Instead of getting £62,500 each, the 13 members who were paid up wanted an extra £14,423 per person by leaving them out.
In Australia, a legal quarrel broke out when Tania and Kevin Parkes ran a syndicate at their news agency. The group of 250 won half of the AU$63 million jackpot, meaning that each member got the equivalent of £150,000 each. Mark Ing soon arrived on the scene, however, claiming that he was also part of the #2 Syndicate and wanted his share. The pair claimed that they had no record of him being part of the group, but that he was part of a different syndicate that they ran which hadn’t won any money on the lottery.