Hakki v Secretary of State for Work And Pensions & Anor

Gambling winnings are not earnings from self-employment for child-support purposes merely because a player gambles regularly, skilfully and methodically for a living. The child-support, social-security and tax regimes should be treated consistently. A gambler is a self-employed earner only where the activities have the organisation of a genuine trade, profession or vocation, rather than repeated successful individual wagers. That may occur where a gambler runs a business and the winnings form part of it. A tribunal’s contrary conclusion cannot stand where the facts permit only the conclusion that there was no gainful employment.

The appellant supported himself by poker winnings but did not support his children. Following an application to the Child Support Agency by their mother, a First-tier Tribunal initially held that the winnings fell within paragraph 15 of Schedule 1 to the Child Support (Maintenance Assessment and Special Cases) Regulations 1992.

Judge Mesher in the Upper Tribunal held that conclusion wrong, but remitted the case to determine whether the appellant was nevertheless a self-employed earner. The First-tier Tribunal then found that he was self-employed as a poker player and assessed income at £520 a week. Judge Mesher upheld that assessment. The appeal concerned whether the appellant’s organised and skilled poker playing constituted gainful employment as a self-employed earner.

1. Appeal allowed. Longmore LJ, with whom Patten and Pitchford LJJ agreed, held that the First-tier Tribunal’s assessment could not stand.

2. The definition of a self-employed earner in section 2(1)(b) of the Social Security Contributions and Benefits Act 1992, read with the definition of employment in section 122(1), had to be applied consistently with the tax treatment of gambling. The child-support scheme was likewise to be treated consistently with that social-security and tax regime. Paragraph 2A(2) of Schedule 1 to the Child Support (Maintenance Assessment and Special Cases) Regulations 1992 reinforced that conclusion by defining self-employed earnings by reference to taxable profits.

3. Graham v Green [1925] 2 K.B. 37 remained authoritative. An individual gambler’s repeated, skilful and even systematic wagers do not thereby become a trade, profession or vocation. A gambler’s activity lacks the organisation of a business unless there is an organised undertaking which itself produces profits or gains.

4. It was possible in principle for gambling winnings to be taxable, and thus potentially to be earnings, where the gambler was genuinely running a business and the winnings formed part of that business. The examples in Down v Compston [1937] 2 All E.R. 475 and Burdge v Pyne [1969] 1 W.L.R. 364 illustrated that distinction. That theoretical possibility did not assist on the facts found.

5. The appellant’s choice of venue and opponents, intended daily target, occasional television appearances, website and published results did not supply the necessary organisation. They showed frequent and successful poker playing, not gainful employment. The only permissible conclusion was that he was not a self-employed earner, applying the converse of the appellate approach in Edwards v Bairstow [1956] A.C. 14.

6. Judge Mesher had correctly held that sufficient organisation could theoretically amount to gainful employment and had properly remitted that factual issue. His earlier decision had not, however, resolved the factual question, so it was wrong to treat it as concluded when disposing of the later appeal. The court noted, without deciding, that a departure direction under the Child Support Act 1991 might be available.

• Court of Appeal (Civil Division): Allowed the appeal and held that the appellant was not gainfully employed as a self-employed earner: [2014] EWCA Civ 530.
• Upper Tribunal (Administrative Appeals Chamber): On 7 August 2013, Judge Mesher upheld the First-tier Tribunal’s maintenance assessment.
• First-tier Tribunal (Social Security): On 28 June 2012, found that the appellant was self-employed as a poker player and assessed income at £520 per week.
• Upper Tribunal (Administrative Appeals Chamber): On 3 February 2011, held that the original paragraph 15 assessment was wrong but remitted the issue whether the appellant was a self-employed earner.
• First-tier Tribunal: On 28 May 2009, held that the poker winnings fell within paragraph 15 of Schedule 1 to the Child Support (Maintenance Assessment and Special Cases) Regulations 1992.