What is the small society lottery in Scotland?

The small society lottery is a type of lottery that can be run by non-commercial organizations such as clubs, societies, charities and local authorities in Scotland to raise funds. Small society lotteries are regulated under the Gambling Act 2005 and operate under a different set of rules than large national lotteries like the National Lottery.

What are the requirements for running a small society lottery?

To run a small society lottery, an organization must register with their local licensing authority. The organization must be non-commercial, which means it must not be set up for private gain. Examples of organizations that can run small society lotteries include sports clubs, charities, clubs, societies, associations, local authorities and other non-commercial organizations.

There are some limits on the size of small society lotteries:

The total value of tickets to be put on sale per single lottery must be £20,000 or less
The aggregate value of tickets to be put on sale for all their lotteries in a calendar year must not exceed £250,000
No more than £25,000 worth of prizes can be given out in any single lottery draw
The maximum price per ticket is £2

As long as the organization meets these limits, they can run lotteries without needing a specific operating license.

What are the steps to set up a small society lottery?

To set up a small society lottery, an organization must:

Register with their local licensing authority at least 28 days before their first lottery draw. This involves providing details about the organization and lottery.
Pay the registration fee – this is set by the local authority, typically around £40.
Appoint two members of the society who are responsible for managing the lottery.
Provide details of the rules and ticket information to the local authority.
Follow rules around advertising and promoting the lottery.
Abide by all legal requirements around prize limits, draw frequency, etc.

Once registered, the organization can start selling tickets and hold lottery draws. They must provide regular reports back to the local authority on the operation of the lottery.

What are the rules around small society lotteries?

Small society lotteries must follow certain rules set out in the Gambling Act 2005. Some key rules include:

Lotteries can only be run for charitable purposes, such as fundraising. Private gain is prohibited.
All proceeds, apart from legitimate expenses, must go to the purposes of the society that organized the lottery.
Tickets can only be sold to society members or on the premises of the society.
A minimum of 20% of lottery proceeds must be donated to the purposes of the society.
Prize limits must be adhered to (£25,000 max per draw).
The lottery draw must be conducted fairly with winners selected via a random process.

Societies must keep accounting records relating to the lotteries for a minimum of three years. The Gambling Commission and local authorities have powers to inspect the records and operations of small society lotteries if needed to ensure compliance.

What are the most common small society lotteries in Scotland?

Some of the most common types of organizations running small society lotteries in Scotland include:

Local charities – Small charity lotteries are very common as a way for local causes to raise extra funds.
Sports clubs – From local football clubs to golf clubs, sports lotteries are used to support clubs and upgrade facilities.
Community associations – Community groups and residents’ associations often run lotteries for local causes.
School PTAs – Parent-teacher associations frequently organize lotteries to supplement school budgets.
Music and arts societies – Orchestras, bands, choirs etc. use society lotteries to raise funds.
University clubs – Student clubs and societies in universities run small lotteries.

The most common format is a standard raffle format. However, some societies have introduced more innovative lottery formats such as weekly lottery draws or scratchcards.

What are the benefits of small society lotteries?

Some key benefits of small society lotteries include:

They provide a source of fundraising for worthy causes and organizations that benefit local communities.
The model allows fundraising without needing to provide goods or services in return.
Lotteries offer a fun and engaging way to raise money that appeal to donors.
They allow organizations to potentially raise larger amounts of money than typical donations.
Rules provide a well-regulated model of fundraising that avoid issues such as excessive gambling.
The lottery format provides appeal through the potential to win prizes.

In summary, small society lotteries blend aspects of fundraising, community support and entertainment. The regulated format provides reassurance that the cause will benefit.

What risks are associated with small society lotteries?

Some risks and critiques of small society lotteries include:

Overuse of small lotteries in a community could lead to donor fatigue.
People struggling with gambling issues may overspend on tickets.
Rules around preventing private gain could be broken in some cases.
Some fraud has occurred in small lotteries, although systems generally prevent this.
There is a risk of diverting funds away from other fundraising if overused.
Volunteers running the lotteries may not always fully understand or follow regulations.

However, the gambling regulation and lottery limits in place are designed to minimize most of these risks for both players and societies.

What are the main points covered in the Gambling Act 2005 relating to small society lotteries?

The key aspects relating to small society lotteries covered in the Gambling Act 2005 include:

Introducing the concept of “small society lotteries” as distinct from large society lotteries.
Defining qualifying societies who can operate small society lotteries.
Stipulating limits on proceeds from small society lotteries of £20,000 per draw and £250,000 annually.
Establishing the maximum prize limit of £25,000 per draw.
Requiring small society lotteries to be registered with local authorities.
Setting out principles around preventing profiteering from lotteries.
Providing enforcement powers for the Gambling Commission and local authorities.
Mandating that a minimum of 20% of proceeds is applied to the purposes of the society.

The Act provides a clear regulatory framework tailored specifically to small non-commercial lotteries to enable fundraising while avoiding harm.

What are the steps involved in running a small society lottery draw?

Typical steps to run a small society lottery draw include:

Plan details of the lottery such as number of tickets, ticket price, prizes and prize draw date.
Ensure plans fit with gambling limits and lottery regulations.
Order professionally printed lottery tickets with unique numbering.
Advertise and sell tickets within the permitted channels for the society.
Keep records of all tickets sold.
Store sold ticket stubs securely before the draw.
Before the draw, ensure the required minimum percentage of funds is allocated to the cause.
On the draw date, conduct the random draw to select winning tickets.
Verify and validate the draw results.
Announce winners publicly and notify them to collect prizes.
Pay out prizes to winners and collect receipts.
Provide records of the completed lottery to the local authority.

Following this standardized process ensures all legal requirements are met and the lottery is conducted fairly.

How are small society lottery winners selected?

There are several methods used to select winners in small society lotteries:

Random number draw – Each ticket is printed with a unique number. Numbers are drawn randomly to select winning tickets.
Bingo-style draws – Players match numbers on tickets against numbers drawn randomly.
Raffle drum draw – Paper tickets are placed in drum and mixed before drawing.
Electronic systems – Secure computer systems can generate verifiably random results.

The key requirements are that the draw process is demonstrably random and cannot be interfered with. Many local authorities require lotteries to use tamper-proof mechanical draw systems or approved external lottery draw services.

Are there any restrictions on who can purchase tickets or win prizes in small society lotteries?

There are some restrictions on who can play small society lotteries:

Tickets can only be sold to members of the society running the lottery or on the society’s premises.
There is a minimum age limit of 16 to purchase tickets or claim prizes.
People directly involved in running the lottery such as committee members and ticket sellers cannot purchase tickets.
The society may set additional rules excluding certain groups from playing based on its nature and purpose.

These rules aim to keep the lottery operating for the sole intended purpose of fundraising for the society. External lottery management companies cannot play or win prizes.

Can small society lotteries sell tickets online?

Traditionally, small society lotteries have only been permitted to sell paper tickets in person to society members on the organization’s premises. However, regulations have been updated in some areas to allow small lotteries to also sell tickets online, bringing practices in line with modern technology use.

To sell tickets online, the society lottery must:

Have approval from their local licensing authority to sell tickets online.
Have appropriate processes to verify players are society members.
Ensure payment and ticket issuance are conducted securely.
Maintain detailed digital records of all ticket sales.
Follow all other lottery rules and social responsibility practices.

Introducing online sales provides a useful additional channel for sales reach. However local licensing oversight helps ensure responsible practices are upheld.

What are the tax and duty implications for small society lotteries?

Small society lotteries benefit from some tax and duty concessions in the UK:

Lottery proceeds used for the society’s original purposes are exempt from income tax and corporation tax.
No duty is payable under the Betting and Gaming Duties Act 1981 as long as proceeds are used properly.
Prizes are exempt from value added tax in most cases.

This reflects the intended purpose of small society lotteries as fundraising vehicles for non-commercial benefit. Societies must closely track use of proceeds to benefit from the exemptions.

How much does it cost to set up and run a small society lottery?

Costs involved in running small society lotteries include:

Local authority registration fee – Typically £40 to £50, paid every 1-3 years.
Tickets – Printed tickets cost 2-5p each depending on complexity.
Advertising – Posters, leaflets, online ads to promote the lottery.
Prizes – Must make up minimum 20% of proceeds.
Admin costs – Record-keeping, mailings, bank fees etc.

Ongoing costs can be met through proceeds. Upfront costs may require existing society funds or startup fundraising. Expenses should be minimized to maximize funds raised.

Conclusion

Small society lotteries provide an established model for fundraising through regulated gambling that balances risk and community benefit. With origins in Old Scottish Hospitals Lotteries centuries ago, the current 2005 regulations allow thousands of non-commercial societies across Scotland to tap into lottery proceeds for their charitable causes while avoiding harm. Careful management according to lottery rules, gambling limits and oversight maintains the integrity and local focus of small society lotteries in communities.