There are many prizes and awards open to authors and other
creative artists (one publication lists nearly 200 for authors
alone) and entering competitions or seeking awards is a normal part
of such professions.
Where an award, grant, bursary or prize is received, the determining factor in considering whether or not such an award etc is taxable is the quality of the award in the hands of the recipient. If it comes to the individual as an incident in the exercise of his or her profession or vocation (including a subsidiary or part-time activity the profits from which are assessed under Case II of Schedule D), it should normally be treated as a professional receipt within Case II of Schedule D. (See Temperley v Smith  37TC18, Smart v Lincolnshire Sugar Co Ltd  20TC643, Duff v Williamson  49TC1, CIR v Falkirk Ice Rink Ltd  51TC42, and McGowan v Brown and Cousins  52TC8). The facts relating to the award or prize should be considered for each case.
In some cases publishers enter works for competitions and entries direct from the author are not permitted although the permission of the author is usually a part of the entry conditions. To attract liability, it is not essential that the author should have applied for the award or prize personally. Nor does the author necessarily have to undertake to complete a particular piece of work during the currency of the award or to refund the award in the event of failure to complete a programme of work.
Case II of Schedule D is not the only charging section. The facts may show that the award is one of the following-
A literary etc prize which is unsolicited, and which is awarded
as a mark of honour, distinction or public esteem in recognition of
outstanding achievement in a particular field, including the field
in which the recipient operates professionally, is not chargeable
to tax. In 1979 the Special Commissioners found for the taxpayer in
a case involving a literary award. The case attracted some press
publicity as a reporter was admitted to the proceedings. The book
was entered for the competition by the publisher without the
author's consent. The decision turned very much upon its own facts
and, in particular, a finding that the award was unsolicited and
did not represent the proceeds of exploitation of the book by the
author personally or by his publishers as agents on his behalf.
Case of doubt or difficulty which cannot be resolved on the lines outlined above should be referred to Business Tax (Technical).