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The expenses of a lottery

The Act defines the expenses of a lottery as ‘costs reasonably incurred organising the lottery’. It is the responsibility of the promoting society or local authority to ensure that when making the arrangements for a lottery, that any expenses have been reasonably incurred. The expenses of a lottery are the costs incurred organising the lottery and this may include expenditure such as the salaries of those organising the lottery, the cost of selling or supplying lottery tickets, printing and distributing tickets and marketing material or paying any fee to an ELM or other service provider that has been rightly incurred in the course of organising the lottery (or part of the lottery) for the society or local authority. The expenses of a lottery do not include any expenditure relating to any other fundraising activity not directly connected to organising the lottery, even if that fundraising activity is undertaken in conjunction with the promotion of a lottery.

Where an ELM is employed to make the arrangements for all or part of the lottery, including paying prizes and expenses, the society or local authority is equally responsible with the ELM3 for the promotion of the lottery. That includes ensuring that all expenses are ‘reasonably incurred’ and that a minimum of 20% of the proceeds are returned to the purposes of the promoting society or to the local authority. It is also important that the promoters of the lottery ensure that the lottery is conducted fairly and openly and that consumers are not misled as to the proportion of the ticket price that is applied to the purposes of the society.

When apportioning the expenses of a society or local authority lottery and recording how the proceeds collected have been used to pay the expenses, the Commission’s view is that it is reasonable for some of the ‘start up’ costs from the proceeds genuinely attributable to the lottery as a whole rather than those related to a specific lottery to be spread over a number of lotteries. These may include, for example, the marketing and advertising or the initial costs of recruiting members to a new lottery. Any expenses that are spread over a number of lotteries must be expenditure directly attributable to those lotteries and the Commission would expect any expenses being treated in this way to be spread over a reasonable and time limited period. The Commission also considers that it is not unlawful for a promoter to use income from sources other than lottery proceeds to fund the start-up costs or other costs of a lottery.

Irrespective of how a lottery operator decides to spread the costs of a lottery the priority must be to ensure that a minimum of 20% of the proceeds of each individual lottery are applied to the purposes of the promoting society or local authority.

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Lottery submissions - lottery proceeds
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