A non-resident parent’s liability for child support is, of course, essentially determined by reference to their income. But what exactly constitutes ‘income’? In particular, do gambling winnings fall within the definition?
This was the question that fell to be determined by the Court of Appeal in French v The Secretary of State for Work and Pensions & Another. In fact, as we will see in a moment, this was the second time in four years that the Court of Appeal had dealt with the question.
The material facts in French were that there was one child, who lived with the mother. The relevant period for the assessment of child support was 1996 to 2011, and thus the case fell within the original, 1993, child support scheme.
The father is a professional gambler. For the last 25 years he has had no other income than that derived from gambling. Lord Justice Hickinbottom, who gave the leading judgment in the Court of Appeal, explained that in 1996 and 1997 the father earned about £30,000 a year from card gambling, from which he had expenses of some £6,800 a year to pay. He was ill and did not play in 1998 and 1999, but returned to play again in 2000, winning £19,000 per year (i.e. £12,200 net) in the period 2000-2, before rising again to his pre-illness level for the period 2003-11.
In addition to the card playing, explained Lord Justice Hickinbottom, the father bet on horses and occasionally boxing, generally winning £1,000-£3,000 net of losses per year, but with additional large single wins on horses in 2002 (£4,000) and 2009 (£30,000). He also had a standing bet of £1,500 per year with a friend as to whether Manchester United (his team) would end the season above Liverpool (his friend’s team). It is a sad thing for a Liverpool supporter to say, but over the period in question the respective fortunes of those teams very much favoured the father.
The father did not pay income tax or national insurance contributions on any of his gambling winnings, as winnings from gambling are generally excluded from the scope of self-employed earnings for the purposes of income tax.
In 2012 the Child Support Agency assessed the father as liable for child support on the basis of his winnings. The assessment was for various periods, and ranged from £95 to £110 per week, except for the years 1998 and 1999 when it was nil.
The father appealed against the assessments, but the First-tier Tribunal found that the gambling winnings should be included as a factor in the child support maintenance assessment, as the gambling was not carried out for recreational purposes, but was an undertaking of employment. The father appealed to the Upper Tribunal, but that upheld the decision of the First-tier tribunal. The father appealed again, to the Court of Appeal.
As usual with the child support scheme, the rules for determining what income should be taken into account for a child support assessment are somewhat complex. Several types of income are recognised, the most important of which are earnings, whether from employment or self-employment. For the purposes of this case, the question revolved around the definition of ‘earnings’. Clearly, the father was not employed, so the relevant definition of ‘earnings’ was “the taxable profits from self-employment”. As gambling winnings are not taxable, they clearly do not fit within that definition.
However, that is not the end of the matter. As mentioned above, the issue of gambling income went before the Court of Appeal previously, in the 2014 case Hakki v Secretary of State for Work and Pensions & Another. In that case the Court of Appeal found that Mr Hakki, a professional poker player, did not have to pay child support from his winnings. The crucial question was whether the gambler undertook any other income-generating activity linked to the gambling, which could in itself be characterised as a trade or other form of self-employment. The Court of Appeal held that Mr Hakki did not, and therefore his winnings were not earnings from gainful employment.
Lord Justice Hickinbottom found that this case was indistinguishable from Hakki. The Tribunal had been wrong: the father was not at any material time gainfully employed as a self-employed earner. Accordingly, the father’s appeal was allowed.
As a footnote, Lord Justice Hickinbottom pointed out that this judgment was not necessarily the end of the matter, as it was possible that the mother could seek a ‘departure direction’, whereby the father could be deemed to have an income that did count for the child support assessment, because his lifestyle was such that it could not be supported without the gambling income. Lord Justice Hickinbottom did not give any indication as to whether any such application would be appropriate or successful. Unfortunately, such ‘lifestyle’ variations do not apply to the current, 2012, child support maintenance scheme (for details of the grounds for variations under the current scheme, see this post), so a parent with care under the current scheme would not have this option.
The full report of the appeal can be read here.