French v The Secretary of State for Work and Pensions & Anor

For child support purposes, gambling winnings are generally outside self-employed earnings. A gambler’s professional status, sole reliance on gambling, regularity, organisation, sophistication or success does not by itself establish gainful employment. Winnings may be included only where the gambling is an adjunct to an independently established trade or profession. Where the facts show mere gambling without such a linked business, the tribunal must find that the gambler is not a self-employed earner.

The appellant’s sole income came from professional gambling. The Child Support Agency included his winnings in child support maintenance assessments for various periods between 1996 and 2011. The First-tier Tribunal upheld that approach, subject to adjustments for notional tax and national insurance contributions. The Upper Tribunal dismissed his appeal. The issue before the Court of Appeal was whether the winnings constituted earnings from gainful employment under the original child support scheme and whether the earlier decision in Hakki had been properly applied.

Appeal allowed. Lord Justice Hickinbottom gave the substantive judgment, with Lord Justice Coulson agreeing.

1. Under the original scheme, regulation 7 of the Child Support (Maintenance Assessment and Special Cases) Regulations 1992 made the absent parent’s income, N, the aggregate of amounts calculated under Schedule 1. The relevant category was Part I Chapter 2, concerning earnings as a self-employed earner. Earnings were taxable profits from self-employment, calculated by reference to Part 2 of the Income Tax (Trading and Other Income) Act 2005. The definition of self-employed earner was imported from section 2(1)(b) of the Social Security Contributions and Benefits Act 1992.
2. The Court of Appeal followed Hakki v Secretary of State for Work and Pensions and Blair [2014] EWCA Civ 530. Mere gambling does not become self-employment merely because it is a professional gambler’s sole income, or because it is regular, organised, sophisticated or profitable. The issue was not simply one of fact dependent on the degree of organisation involved in the gambling.
3. The boundary is whether the gambling is an adjunct to another trade or profession. Winnings may form part of the receipts of an existing business, as illustrated by Burdge v Pyne [1969] 1 WLR 364. Mere gambling without such an associated business cannot amount to profits or gains from a trade, profession or employment. The earlier revenue authorities, including Graham v Green [1925] 2 KB 37 and Down v Compston [1937] 2 All ER 475, supported that distinction.
4. On the First-tier Tribunal’s findings, the appellant carried on mere gambling and no separate income-generating business linked to it. The only proper conclusion was that he was not gainfully employed as a self-employed earner. The Upper Tribunal therefore erred in law by treating the matter as one of fact and by misconstruing Hakki.
5. Under section 14(2)(b)(ii) of the Tribunals, Courts and Enforcement Act 2007, the court set aside the Upper Tribunal’s decision, remade the decision, allowed the appeal from the First-tier Tribunal and found that no self-employed income was attributable to the appellant. The matter was remitted to the Secretary of State to remake the child support decision. Obiter, the judgment did not remove the second respondent’s opportunity to seek a departure direction under sections 28A–28I of the Child Support Act 1991.

1. Court of Appeal (Civil Division) allowed the appeal, set aside the Upper Tribunal’s decision, remade the decision and remitted the matter to the Secretary of State.
2. Upper Tribunal (Administrative Appeals Chamber) dismissed the substantive appeal on 2 February 2016 and confirmed the First-tier Tribunal’s conclusion that the gambling winnings should be included.
3. First-tier Tribunal (Social Entitlement Chamber) refused the appeal on 12 December 2014, while varying the assessments to reflect notional income tax and national insurance contributions.