National Lottery Syndicates....are they tax free?

Lottery syndicates are tax free so long as the members have written agreement in place.

If there is no [written] agreement and the winner of a prize transfers part of it to others, these gifts may attract Inheritance Tax. If the members of the group can prove that the distribution of the prize was made in accordance with a group agreement entered into before the win, no liability to Inheritance Tax will arise [effectively this means you need a written agreement]. It is important to note that Inland Revenue law and practice may change, the comments on Inheritance Tax are based on our understanding of Inland Revenue practice as of November 1994 [sadly, there's nothing else about Inheritance Tax e.g. Is there a personal allowance ? What's the tax rate (40%) ? etc.].

By having an agreement all recorded members will avoid inheritance tax on any large winnings. The absence of an agreement, however, may result in such tax being liable to all those in the syndicate (aside from the person that will take responsibility for the winning ticket).

Most importantly, make sure that you create a new agreement for every change in the syndicate i.e. new members, opting out members, changed policies, changes to what people pay, etc.

I have to admit a written agreement like this is not always great. Lets say you have certain members of your syndicate that do not play every week and decide play on alternative weeks or when the jackpots are big. It’s almost as though agreement needs to be flexible to cater for members wanting to leave or join the syndicate whenever. I don’t know any  Syndicate manager keen on drawing up agreements every week for such members, adding to the already pain staking work load with data entry. This agreement though is clearly important. There needs to be agreement to just say that if a player has put the money in for that week then he is in, and deserves a tax free cut of the winnings. But if some players are away on holiday and forget to put enough money in the syndicate then they are out? Collection of money is another problem.