The National Lottery’s tax returns are facing scrutiny in the British press amid a potentially costly legal battle getting underway this week.
Richard Desmond’s legal case against the UK Gambling Commission (UKGC) entered the High Court of Justice of England and Wales this Thursday, 9 October.
The businessman is claiming £1.3bn, arguing that his bid during the Fourth National Lottery licence contest was unfairly dismissed in favour of Allwyn, the incumbent operator.
This figure is based on projected earnings that Desmond’s The New Lottery Corporation (TNLC), calculates it would have made so far should it have secured the National Lottery bid.
According to The Guardian, which has been reporting from the courtroom, Desmond’s lawyers claim that there were ‘manifest errors’ in the Commission’s conduct of the licence contest, citing business connections held by KKCG.
Lawyers have cited connections between KKCG and Russian state energy company Gazprom, and alleged connections with a financial services firm fined in the Czech Republic. Desmond’s lawyers argue that neither of these were investigated properly by the Commission.
Lawyers representing the Commission, and effectively also representing Allwyn’s stewardship as National Lottery operator and a party to the case, have argued that the TNLC’s bid for the 10-year licence was ranked “extremely badly” in comparison to other bids.
Courts no stranger to the National Lottery
Desmond is owner of the Northern & Shell Investment firm, a major UK publishing group which prints the Daily Express and Daily Star among other newspapers. His experience of the lottery industry primarily comes from Northern & Shell’s management of The Health Lottery since 2011.
When the Commission awarded the contract to Allwyn, though, the Czech-based multinational immediately faced legal challenges, firstly from Camelot UK. The company was formed back in 1993 with the sole intention of running the National Lottery, which held its first draw in 1994.
Camelot UK’s legal challenge was eventually dropped after Allwyn secured terms to acquire both the company and the associated Camelot Lottery Systems (Camelot LS) from its then-owner, the Ontario Teachers Pension Plan (OTTP).
Desmond’s challenge was not going anywhere, however. The Commission did offer to settle out of court for £10m, but this was rejected by the businessman – though he did drop part of his claim earlier this year.
Regardless of this, the Commission, the National Lottery and possibly the taxpayer still stand to lose out in this case, should the High Court rule in favour of Desmond – of course the Commission’s legal team is putting a lot of effort into preventing this.
According to the Commission’s latest accounts, its legal fees for the 2024/25 financial year rose to £13.4m from £400,000 the year prior. Its total operational costs related to the National Lottery regulation were up from £14.4m last year to £28.8m in 2024/25.
According to The Telegraph, which claims to have assessed official figures around National Lottery sales, the lottery will generate £84bn in sales by the end of the 10-year licence, which would generate taxes of £10bn. The Telegraph states that this is less than expected based on Allwyn’s bid.
Allwyn has been facing regulatory scrutiny itself over the past couple of months, with the Commission’s 2024-25 annual accounts and report explaining that it had initiated enforcement action over the firm’s licensing duties.
The company undertook a huge revamp of National Lottery terminals earlier this year, a duty under its licence contract. However, this did not adhere to the timeline agreed in its contract, leading to the UKGC investigation.
Meanwhile, back on the topic of tax, should the High Court rule in favour of Desmond, there is the chance that the British taxpayer may have to contribute. Any sums paid to Desmond will be paid out of National Lottery good causes, but if it surpasses the amount set aside for this purpose, taxpayer money will have to contribute.
