Are all my spread bet profits tax free?

[Parky]

Hi Parky,
Can you give an example of a broker who offers this facility please? I ask as I don't know of anyone doing this, although there are an increasing number of spread betting firms who are edging closer to the DMA model.

One such broker that I'm considering switching to and currently have a demo account with is InterTrader Direct. As you will see if you visit their site, it's a spread betting provider who offers their version of direct market access, along with no 'dealing desk' execution via automated ECN/STP processing. However, as Jon points out in his post above, although they offer some of the advantages of a DMA broker, they remain a spread betting firm and I will still be trading with/against them and any profits I make will be tax free.
Tim.

Tim,
I would rather not name names, but if you are using a standard trading platform such as TT, Stellar, Ork, RTS etc. etc. then you have direct market access and a flat price, you are not spread trading, post trade a spread bet is created for the purpose of Tax avoidance...slam dunk.

 

[Lúidín]

For those of us living in the UK, spreadbetting profits are free from income tax and capital gains tax, which of course makes a huge difference to the bottom line (for anyone who's profitable).

You need to be very careful with that assumption, as it could cost you a lot of money in the future with unpaid taxes, unless you have thoroughly checked out your personal circumstances with a specialized tax adviser.

My understanding, as of now, is that if you have no other means of income apart from trading, then spreadbetting will fall under taxable income. You have to prove that you have another main income stream, and even then you need to get a specialized tax adviser to make sure you are definitely covered. Tax authorities have a habit of leaving things vague, for obvious reasons, so if you are profitable with your trading, it is wise to spend a bit on getting your tax affairs in order, or as mentioned, you might be very sorry later on.

Your tax adviser should be aware of this link, if not get someone who is.

Take special note of no. 2

http://www.hmrc.gov.uk/manuals/bimmanual/bim20205.htm

Hope this helps.

What markets do you trade btw, as I am interested in how female traders get on daytrading? Women tend to be more focused than men, and therefore should make better daytraders.

Lúidín

 

[alexaherself]

My understanding, as of now, is that if you have no other means of income apart from trading, then spreadbetting will fall under taxable income.

I'm not a qualified accountant, but my information is very different.

Granted, all my information is second-hand, but I've been told that no UK taxpayer has ever been assessed for either income tax or CGT on any spreadbetting profits, regardless of whether or not it's their primary or even sole source of income, and I believe that to be true.

Trading forums (including this one) contain many threads in which people have expressed exactly the opinion you offer above, but to the best of my knowledge, nobody has ever been able to adduce a shred of evidence in favour of that view. All it would take, to justify it, is for one person to demonstrate that they've ever had to pay any form of tax on spreadbetting profits. The discussion has been going on for at least a decade, but apparently nobody has ever been able to do so.

You have to prove that you have another main income stream

I believe you're mistaken.

Nobody who's ever expressed this opinion before has been able to justify it.

If you can, I'm all ears, and will immediately admit that I'm mistaken.

What markets do you trade btw

At the moment, spot forex only, but I'm considering making a "big move" to futures, and won't be surprised if, by this time next year, futures are all I trade.

And apologies for my contentious tone! It's just that people have been saying what you've said for years, with no evidence at all for it. 😱

 

[Lúidín]

I'm not a qualified accountant, but my information is very different.

Granted, all my information is second-hand, but I've been told that no UK taxpayer has ever been assessed for either income tax or CGT on any spreadbetting profits, regardless of whether or not it's their primary or even sole source of income, and I believe that to be true.

Trading forums (including this one) contain many threads in which people have expressed exactly the opinion you offer above, but to the best of my knowledge, nobody has ever been able to adduce a shred of evidence in favour of that view. All it would take, to justify it, is for one person to demonstrate that they've ever had to pay any form of tax on spreadbetting profits. The discussion has been going on for at least a decade, but apparently nobody has ever been able to do so.



I believe you're mistaken.

Nobody who's ever expressed this opinion before has been able to justify it.

If you can, I'm all ears, and will immediately admit that I'm mistaken.



At the moment, spot forex only, but I'm considering making a "big move" to futures, and won't be surprised if, by this time next year, futures are all I trade.

And apologies for my contentious tone! It's just that people have been saying what you've said for years, with no evidence at all for it. 😱

I do not live in the UK, but if i did i would make it my business to find out, and not rely on hearsay. You could ask the tax authorities, but they will not give you a direct answer, as it is not in their interests to do so.

As mentioned, the only way to be sure is to get a specialist tax adviser, as in someone who has dealt with such, or very similar issue, as all is fine until the s**t hits the fan with tax authorities, and it is always better to be safe than sorry.

Fwiw, I met with such a tax specialist, and he was very clear to me that the tax authorities in Ireland will definitely look at spreadbetting used for daytrading as taxable income, based on the details in the link I provided to you, as they are very similar here in Ireland to the UK. He was adamant that if the spreadbetting was my only source of income, then I would have very little chance of winning a case against revenue, should it come to that. Needless to say, I was not going to take a chance, and my spreadbetting profits were declared as part of my income.

I have gone away from spreadbetting due to this "issue".

Each person is responsible for their own tax affairs, and how they handle same is entirely up to them.

In relation to trading, I have gone full circle and gone back to what i originally started out trading, that being US stocks and options, adding index and vol etf's instead of index futures.

Will be interested to see how you get on with futures trading when you start trading same, and what approach you use?

Are there many women trading that you know of, as I don't know of one in Ireland that trades full time, never mind successfully.

Lúidín

 

[papeter]

I know of someone who is making 6 figures a year on Horse racing and that is his only income. He doesn't pay one penny in tax and has never been challenged either. There is no difference betting on horses, football, sportsbetting, sports arbitrage etc. It all amounts to a degree of gambling. SB does however does lend itself to more skillful observations to ascertain an outcome.

 

[alexaherself]

I do not live in the UK

I do.

if i did i would make it my business to find out, and not rely on hearsay.

I did; thanks.

I met with such a tax specialist, and he was very clear to me that the tax authorities in Ireland will definitely look at spreadbetting used for daytrading as taxable income, based on the details in the link I provided to you, as they are very similar here in Ireland to the UK.

To my shame, I've never been to Ireland.

I can't really add much to what I said above, which is that I believe that no UK taxpayer has ever had to pay any tax on spreadbetting income. If someone proves that wrong, then of course I'm mistaken. But until that happens, I won't be changing my mind.

You'd think, after all these years of exactly the same conversation going round and round and round in trading forums, on the "sole income" question, that if there'd ever been one, someone would have some kind of evidence of it, wouldn't you? 😕

I would, anyway. 🙂

After replying to you earlier, I used the "advanced search" function here and found some threads from 2004/5 in which members back then were having exactly the same conversation, as well as one thread from earlier this year in which people saying what you're saying here were challenged to offer any evidence of it at all, even of one person ever having to pay tax, and the same thing in other trading forums too; but it looks like nobody can, and nobody ever could, and in my opinion there's a very good and very obvious reason for that. 😉

Are there many women trading that you know of

Yes; many. You'll appreciate that I don't want to start promoting other forums, here, but some trading forums have very long conversations/threads on the subject, which include endless links to websites/interviews/blogs/information of and about successful women traders. I even have two female friends, myself, who are full-time traders (one is a former institutional trader, who used to work for a hedge-fund).

 

[Lúidín]

I know of someone who is making 6 figures a year on Horse racing and that is his only income. He doesn't pay one penny in tax and has never been challenged either. There is no difference betting on horses, football, sportsbetting, sports arbitrage etc. It all amounts to a degree of gambling. SB does however does lend itself to more skillful observations to ascertain an outcome.

As mentioned, it is up to each and every person to look after their own affairs, so be very careful whom you listen to, as one day you might regret it if you do not make it your business to clarify your individual situation in relation to taxable income.

Lúidín


Firstly, the UK Gov does not say that spreadbetting is "not" taxable!

http://www.hmrc.gov.uk/manuals/bimmanual/BIM22020.htm

BIM22020 - Meaning of trade: exceptions and alternatives: betting and gambling - spread betting

The principles of Down v Compston [1937] 21TC60 and Burdge v Pyne [1968] 45TC320 (see BIM22019) apply equally to spread betting. To be taxable, the spread betting wins must come not merely from an opportunity presented by a trade, they must arise from the carrying on of that trade. Whether or not a particular spread bet is taxable will depend on the terms of the contract and the economic substance of what is done.

For more on financial spread bets entered into by companies, see CFM50380.

Secondly, Australia has already taxed spreadbetting, so the chances of other countries using this example in a court will more than likely arise if such a case is brought in front of the courts.

 

[Lúidín]

I do.



I did; thanks.



To my shame, I've never been to Ireland.

I can't really add much to what I said above, which is that I believe that no UK taxpayer has ever had to pay any tax on spreadbetting income. If someone proves that wrong, then of course I'm mistaken. But until that happens, I won't be changing my mind.

You'd think, after all these years of exactly the same conversation going round and round and round in trading forums, on the "sole income" question, that if there'd ever been one, someone would have some kind of evidence of it, wouldn't you? 😕

I would, anyway. 🙂

After replying to you earlier, I used the "advanced search" function here and found some threads from 2004/5 in which members back then were having exactly the same conversation, as well as one thread from earlier this year in which people saying what you're saying here were challenged to offer any evidence of it at all, even of one person ever having to pay tax, and the same thing in other trading forums too; but it looks like nobody can, and nobody ever could, and in my opinion there's a very good and very obvious reason for that. 😉



Yes; many. You'll appreciate that I don't want to start promoting other forums, here, but some trading forums have very long conversations/threads on the subject, which include endless links to websites/interviews/blogs/information of and about successful women traders. I even have two female friends, myself, who are full-time traders (one is a former institutional trader, who used to work for a hedge-fund).

Yes, and it is very obvious why not one was able to produce the evidence, for this is why the governments leave it be, but be under no illusion, if you ever become good enough to make a six figure amount from spreadbetting in one year, you will be taxed if you disclose it to revenue, and I would bet my house on it 🙂

There may be one exception, and that is if you do only 1 trade in the year:idea:

Lúidín

 

[alexaherself]

if you ever become good enough to make a six figure amount from spreadbetting in one year, you will be taxed if you disclose it to revenue

Now you're moving away from giving your personal opinion to making it sound like a factual statement, Lúidín, and we both know that it isn't that. 😢

This is what I dislike about these discussions: people apparently have such an emotional investment in "Being Right" about their positions, and they imagine that talking of "betting their house on it", and other melodramatic emphasis, will somehow persuade others that they must know what they're talking about, even if they don't themselves live in the UK and don't actually have a shred of evidence to justify their perspective (for the simple reason that there isn't any!).

I believe that no UK citizen has ever been taxed on spreadbetting profits, and that there are plenty earning 6-figures a year, and that HMRC is fully aware of that.

You'd think, after all these years of exactly the same conversation going round and round and round in trading forums, on the "sole income" question, that if there'd ever been anyone who had had to pay any tax on spreadbetting income, someone, somewhere, would have some kind of evidence of it, wouldn't you? But they don't, it seems, however strongly they hold their opinion and however much they'd bet on it. That's the inescapable reality: it has been for more than a decade, and it still is now. 😉

 

[Lúidín]

So you are saying that it is ok to ignore what the UK tax authorities say, and have published same on their website?
How about reversing it, and asking someone to prove they have made money spreadbetting, and did not pay income tax on it.
As for facts, they are exactly what I have looked at, as my only concern is my own tax affairs, whatever anyone else does is entirely their own business.
People will always believe what they want to believe.

One could always contact the tax authorities and explian the situation, which I might do when I have time..at least it will put the case to rest 🙂

Lúidín

 

[alexaherself]

So you are saying that it is ok to ignore what the UK tax authorities say, and have published same on their website?

I didn't say that.

We can all see how much you want to be right about this issue, Lúidín, in spite of your having zero evidence for your contention. I have absolutely no problem with that, nor with letting you have the last word, either - just please don't misquote me or put words into my mouth, according to your own interpretation of the situation, ok? Hope that's not too much to ask! 😉

 

[timsk]

. . . I am not prepared to discuss my own case openly in a forum - as its totally private and is also complex.

FoMo,
You're being a very naughty boy. Again.

If you're not prepared to discuss your personal circumstances (and that's fair enough - no criticism there), have the decency to remove your last post because, as Alexa rightly points out, no one has been able to provide a shred of evidence to back up the assertions that spread betters pay tax. That includes you.

You have a very unpleasant habit of ignoring threads and discussions when you're challenged, lying low for a bit, and then popping up in a new thread to make exactly the same unsubstantiated claims again. It's not on FoMo, it's not helpful to members and serves no purpose other than to further muddy the waters. So, kindly butt out or provide the evidence that I and others asked of you in the other thread.
Tim.

 

[timsk]

I have some questions to those of you who subscribe to the view that HMRC won't tax spread betting income if the trader concerned has another form of income . . .

1. What constitutes another income and how big does it need to be - is there a minimum?
2. Must it exceed the income generated from spread betting profits - or will any other income of any size suffice?
3. If a trader's spread betting profits are, say £10,000 and their other income produces £10,001 - does that then mean their spread betting profits will be tax free?
4. Conversely, if their other income only produces £9,999 - does that then mean their spread betting profits will be taxed?
5. What if the trader makes a profit one year - and pays tax accordingly - but makes a loss the following year. Will s/he be able to offset the losses against tax?

The notion that HMRC just make this stuff up as they go along, chopping and changing to suit themselves is one that, personally, I really struggle with. If anyone can provide some solid evidence - as in a HMRC document that details all the above - that would be very helpful and would put an end to this discussion once and for all.
Tim.

 

[Forexmospherian]

FoMo,
You're being a very naughty boy. Again.

If you're not prepared to discuss your personal circumstances (and that's fair enough - no criticism there), have the decency to remove your last post because, as Alexa rightly points out, no one has been able to provide a shred of evidence to back up the assertions that spread betters pay tax. That includes you.

You have a very unpleasant habit of ignoring threads and discussions when you're challenged, lying low for a bit, and then popping up in a new thread to make exactly the same unsubstantiated claims again. It's not on FoMo, it's not helpful to members and serves no purpose other than to further muddy the waters. So, kindly butt out or provide the evidence that I and others asked of you in the other thread.
Tim.

Appreciate your comment Tim

As i have said in the previous email - i am not prepared to discuss my own personal tax investigation in open forum

All I can say - as advised to Alexa - take only advice on your own personal situation from a proper top 5 Accountancy firm. Mine was KPMG Birmingham office and at the time my own accountants were WJ Edwards from Walsall

All i know is the clear advise they gave me - it was crystal clear and cost me money

Whether that applies to other spreadbetters is of no concern to me - all I am doing is given proper advice -

Its then up to every member to check their own situation out

Regards


F

 

[alexaherself]

The notion that HMRC just make this stuff up as they go along, chopping and changing to suit themselves is one that, personally, I really struggle with.

Likewise.

I also struggle with the idea that the regulators would tolerate indefinitely (as they certainly appear to) the apparently unconditional statements made on some regulated spreadbetting firms' websites to the effect that spreadbetting profits are free of all tax, to UK taxpayers, if there were any real question about its validity.

 

[Forexmospherian]

Likewise.

I also struggle with the idea that the regulators would tolerate indefinitely (as they certainly appear to) the apparently unconditional statements made on some regulated spreadbetting firms' websites to the effect that spreadbetting profits are free of all tax, to UK taxpayers, if there were any real question about its validity.

Alexa

Incorrect

Check out how they have subtly changed them over last 5 -7 years

As always the devil is in the detail ( small print )

Now most spreadbetting companies ALWAYS - advise their customers to take individual tax advice relating to their own circumstances.

I pointed this out in the other thread Tim mentioned - and will give you similar examples today if required but genuinely do not want to take this thread off subject - because I don't want to get into any more trouble

Regards

F

I will revisit the other thread as advised by Tim

PS - removed my post as requested

 

[metrader]

'To be taxable, the spread betting wins must come not merely from an opportunity presented by a trade, they must arise from the carrying on of that trade.'

http://www.hmrc.gov.uk/manuals/bimmanual/BIM22020.htm

 

[papeter]

I do not live in the UK, but if i did i would make it my business to find out, and not rely on hearsay. You could ask the tax authorities, but they will not give you a direct answer, as it is not in their interests to do so.

As mentioned, the only way to be sure is to get a specialist tax adviser, as in someone who has dealt with such, or very similar issue, as all is fine until the s**t hits the fan with tax authorities, and it is always better to be safe than sorry.

Fwiw, I met with such a tax specialist, and he was very clear to me that the tax authorities in Ireland will definitely look at spreadbetting used for daytrading as taxable income, based on the details in the link I provided to you, as they are very similar here in Ireland to the UK. He was adamant that if the spreadbetting was my only source of income, then I would have very little chance of winning a case against revenue, should it come to that. Needless to say, I was not going to take a chance, and my spreadbetting profits were declared as part of my income.

I have gone away from spreadbetting due to this "issue".

Each person is responsible for their own tax affairs, and how they handle same is entirely up to them.

In relation to trading, I have gone full circle and gone back to what i originally started out trading, that being US stocks and options, adding index and vol etf's instead of index futures.

Will be interested to see how you get on with futures trading when you start trading same, and what approach you use?

Are there many women trading that you know of, as I don't know of one in Ireland that trades full time, never mind successfully.

Lúidín

Ireland is not the same tax jurisdiction thankfully. UK tax laws are totally different to EU.

 

[metrader]

'To be taxable, the spread betting wins must come not merely from an opportunity presented by a trade, they must arise from the carrying on of that trade.'

http://www.hmrc.gov.uk/manuals/bimmanual/BIM22020.htm

For companies is different:'A financial spread bet, if entered into by a company, will also be a contract for differences'

http://www.hmrc.gov.uk/manuals/cfmmanual/cfm50380.htm

All this apply in UK only, different countries may have different rules.

 

[Forexmospherian]

I have some questions to those of you who subscribe to the view that HMRC won't tax spread betting income if the trader concerned has another form of income . . .

1. What constitutes another income and how big does it need to be - is there a minimum?
2. Must it exceed the income generated from spread betting profits - or will any other income of any size suffice?
3. If a trader's spread betting profits are, say £10,000 and their other income produces £10,001 - does that then mean their spread betting profits will be tax free?
4. Conversely, if their other income only produces £9,999 - does that then mean their spread betting profits will be taxed?
5. What if the trader makes a profit one year - and pays tax accordingly - but makes a loss the following year. Will s/he be able to offset the losses against tax?

The notion that HMRC just make this stuff up as they go along, chopping and changing to suit themselves is one that, personally, I really struggle with. If anyone can provide some solid evidence - as in a HMRC document that details all the above - that would be very helpful and would put an end to this discussion once and for all.
Tim.

Hi Tim

I have moved this post over to this thread as its the one you would prefer I stay on - and that's no problem.

Ok you have asked more questions and they are all easy to answer.

The first point - life is rarely black or white - right or wrong - yes or no - in most areas of life there are "grey" areas.

There are lots of grey areas in the UK taxation system - that's why we have legal tax avoidance methods that get around many of the normal taxation rules and regulations and have been doing for many years.

After 2008 the HMRC finally woke up and became "streetwise" after realising so many of their ex employees had jumped shop and end up working for accountancy groups - advising ways of getting around the rules and regulations.

So the answer - the one many companies use and certainly would be the advice of companies like Goldmans or Mckinsey consultants would be - wake up and play smart!!

You do this by having "grey areas " in the rules and regulations - so that the guys who then exploit them can be trapped by basically other methods - a classic most recently on Starbucks and their tax affairs - you catch the punter out - in Starbucks case by dropping it out to the media. Jimmy Carr - another example.

Its a classic business game played by all and sundry.

In the spreadbetting case - as you would suspect - the majority of spreadbetters will never ever have to pay tax - I agree with that.

But the clever so and so's who might be playing their own game and trying to find a way of not paying ten's of thousands of tax on larger earnings - then they are not going to get away with it - and quite rightly they should not be allowed to

So as the HMRC after 2008 started to frighten a few punters - me included - they use subtle clever method to win their cases with out them every going to court.

Again - finally the HMRC are waking up in the real world and playing business people at their own game.

Please Tim - ask any spreadbetting company you want to - why they advice their clients to check their own tax situation out. In maybe 90% of cases - they will not have to pay tax because - 75% of all spreadbetters lose over a year anyway and what 90% are not full time paying no other taxes from other income.

This is why the industry regulators still allow this message of spread betting being tax free in the UK to still stand. For the vast majority - it is.

But why do you think the spreadbetting companies have been adding more small print to their own T & C's over the last 5 -7 years ??

That's a fact - please check it out

Regards


F