Trumped by the Taxman

A recent Tax Tribunal case involved what I’d consider to be a long-odds gamble by the English Bridge Union (“EBU”).  There’s little doubt that the card game Bridge is one of skill but the EBU were trying to argue that it was a sport.  If Bridge were a sport, members of the EBU would not have to pay VAT on competition entry fees.  The sums involved were significant (£631,000 in 2012-13) and so perhaps the EBU thought the gamble worthwhile. Certainly, the International Olympic Committee recognised Contract Bridge as a sport in 1995 and it was an exhibition event at the 2002 Winter Olympics. However, I’m not personally surprised to report that the EBU lost, with the Tribunal concluding that “Contract Bridge involves some physical activity but not a significant amount” and further, that “physical skill is not particularly important to the outcome”.

This reminded me of an argument between the Taxman and a card player over in the USA in 1998.  This time, the card game was poker and the player was one Billy Baxter.  Baxter was a professional gambler and a very good poker player. In all, over the years, Baxter won many millions of dollars and seven titles at the poker equivalent of the Olympic games, the “World Series of Poker”.  In the USA, gambling winnings of all kinds are subject to taxation and so Baxter’s poker winnings were taxable.  Baxter accepted this but he argued that what he did amounted a ‘trade or business’ and so he should be able to deduct his costs (such as travel and pension contributions) from his earnings like any other businessman.  The US Taxman disagreed, arguing that Poker was gambling, relying largely on luck, but Baxter won in court.  Perhaps the Judge had played poker as he famously commented “I find the government’s argument to be ludicrous. I just wish you had some money and could sit down with Mr. Baxter and play some poker.”

Meanwhile here in the UK, a 2007 case bought under the Gaming Act against a bar/poker club came to the conclusion that poker was NOT a game of skill.  I can only assume that the judge and jury in that case hadn’t played any poker.

I sometimes wonder which is more down to luck, winning a game of cards or winning a tax argument in court.

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