Best Thread Capital Spreads

[stevespray]

Gullible - You said "A betting levy is paid at source, therefore all gambling profits are tax free. Revenue can not say that just because soembody has had good fortune to have gambling wins they want a share of it"

Based on my knowledge I would have to suggest that this is your opinion rather than stated fact. Obviously this whole subject is a huge grey area and hence why this type of exchange of views takes place every 3 months or so.
It is possible to argue the same point about Capital Gains Tax as it is about the IR and speadbet winnings. ie they contributed nothing but want a share of the spoils. Who says its all done fairly.
The facts are that some people who gamble on horses are taxed as 'professional gamblers' because this is there only source of income.
If you think about it logically then it is possible to argue that spreadbetting is tax avoidance pure and simple. That can not be said of the horse gambler because there is no alternitive to betting.

Steve

 

[Roberto]

A betting levy is paid at source, therefore all gambling profits are tax free.

With respect, I completely disagree with this. It seems to me that if this were true, nobody would ever have to pay income tax on their winnings from horse-race betting. The fact that some people do is not simply opinion; it's factual. There's a lot of case-law on the subject.

 

[stevet]

But there must be active swing traders using the SB's to take a short term positional trade where the spread will not hurt them so much.

re your ealier analysis as to why there must be some people making money from spreadbetting - and i understand your thinking - but the key words for example in your above quote are "But there must be " - but why must there be?

swing trading is the hardest (impossible) type of trading there is - its a name for a type of trading that probably just came from someone trying to find a new angle to market a book or training thing - taking outright unhedged positions in anything- let alone over a long time period (over a day) - is just gambling - unless you have some inside knowledge about the company - and even then - your information might be right - but you might end up losing if the overall market direction is against you

and sure - if you do a few swing trades in a year -maybe you are lucky and have a few wins - but over a few years - as you do each trade - the fact that you are just gambling will move the pendulum over time so you do just end up losing

so i still dont believe anyone is making an on-going continuous living just from spreadbetting - but of course i will admit that there are a multitude of people posting on trade2win who seem to have that midas touch that professional traders who trade the real markets dont seem to have!

and again - the day that the tax man would remove the present tax status from spreadbetting and cause tax to be paid on wins - is the day i would start to get more positive about the use of spreadbetting

 

[stevespray]

SteveT.....I have to admit to consistantly making money via spreadbetting. I have done so for several years now. I'd be happy to discuss a number of strategies with you if you so wish.

Feel free to PM me.

Steve.

 

[kevin546]

Stevet

Sb may not be the best way to trade but you can still make money from it. I think we will just have to go with our own opinions on this topic.

Kevin

 

[capitalspreads]

Re SB client profitability

over the last few days we have quite a few clients who have stayed long of the FTSE /Dow/ Dax. On our spread of 4 for the FTSE sep/oct/nov/dec (we quote the same spread no matter how far out your bet unlike our competitors who widen the price the further out the trade) this has turned into a tidy little profit for those the right way round. Of course, as in the real trading world, there are always those who are losing.

All the futures markets are no net gain products (for every winner there must be a loser) as in the FX market and in the long run even in the equity markets. In general the only guaranteed winner is the broker.

If you trade currencies our prices almost match the best online systems (maybe a pip wider here and there) but there is no brokerage with us. We quote six month forward equity prices at in general a spread of about 0.3%.

Yes... for day trading (apart from FX and daily shares) it is difficult to make money consistently in SB but then it is difficult no matter where you trade. But for longer term positions SB is a very valuable trading instrument.

 

[gullible]

Stevespary,

Thank you for your well thought out and lucid reply. I am no expert and am prepared to accept your views.(subject to the last paragraph) Fortunately or rather unfortunately, I do not have a tax problem as I am nursing heavy losses in both CFD and spread bet activity.

I personally will seek advice of a competent tax lawyer when I make a fortune on my spreadbetting account. CFD's do not have a choice but to pay Capital Gains Tax.

I would welcome some ideas on how to start making some money (recoup losses).

Finally, I would add that browsing the net I came across the following:-

S53 ICTA 1988.( section 53 of Income and Corporation Taxes Act 1988).
Gambling does not constitute a trade for the person gambling. Gambling winnings are therefore not taxable, and conversely tax relief is not available for any losses. Graham V Green (1925). The gambler in question did nothing esle but gable for a living.

I am certian that 'gambling; winnnigs are tax exempt in the UK. It may be just possible that spreadbeeting may not fall into the definition of gambling, but i fail to see this.



Perhaps, tax lawyers/tax accountant members (if any) of this board may help?

best regards


Gullible.

 

[gullible]

Capital spreads,

In view of the fact that your marketing material refers to 'tax free; winnings you should get your firm's accountants to confirm or other wise the following:-

Are the winnings free of all taxes; and

Is spread betting classified a gambling activity.

Gullible.

 

[gullible]

Yes, the tax business is a grey area indeed.

I've discussed it over the last couple of years with two specialist accountants and two tax inspectors and am only a little better informed now than I was before that!

My impressions are:- ...

If you back horses _for a living_ the taxman will _certainly_ want income tax from you; there's no possible question about this and many cases to read up on the subject.

If you earn £20,000 working in some "ordinary job" and earn another £100,000 from spread-betting (unlikely, but for argument's sake!), the tax man would probably have _great_ difficulty getting any tax income from you at all on the spread-betting winnings, and probably such great difficulty that in practice he wouldn't try.

But if you didn't declare and pay income tax on the £20,000 it would be a whole different ball-game, because the spread-betting income would be your only income. In other words, it's not the relative _sizes_ of each source of income that matters; it's the fact that you have to be seen to be "earning a living" (which probably means something close-ish to the average national wage, or certainly at least the minimum wage) very officially and paying income tax on it for your additional spread-bet income _necessarily_ to be tax-free.

In other words, the blanket statements one so often sees about spread-bet income being tax-free are quite some oversimplification, although so far in practice they have probably been for almost everyone. At some future point, there _will_ be a test-case on this: it's inevitable.

Of course, if you were earning enough from it, you could set yourself up with a nice little offshore company through a Guernsey accountant and pay yourself a nominal salary on which you pay some UK income tax. That would be what I'd want to try, anyway.

Roberto,

Pls can you tell us which test cases you have based your impressions on?
There is a definitive test case in which it was decided that a 'professional' horse gambler can keep all his winnings tax free.

The suggestion about off shore company is NOT going to work. If taxaable earnings are generated in the UK than they are subject to UK tax legislation. A sure way to go to jail if and when found out. Speak to the two accountants you have alreay consulted. They will run a mile from you!



best regards


Gullible

 

[kevin546]

Gullible

I quite agree with your comments. However I do believe the SB companies are not misrepresenting themselves because SB is considered gambling. I think (and I am no expert) that the casual SB just like any betting would not be subject to income tax. But it is the manner in which the SB or any betting is carried out that seems to bring the trader/gambler to attention. It should be interesting to see what happens to those out there that are actively trading arbitrage bets. To be profitable with this you need multiple accounts and a professional attitude. Could that become an income. If the IR were to consider some SB as obtaining an income from the financial markets then the same could be said of any betting. I do not know the answer yet but the common thought does seem to be the manner of income through SB when it is the sole income.

Kevin

Capital spreads,

In view of the fact that your marketing material refers to 'tax free; winnings you should get your firm's accountants to confirm or other wise the following:-

Are the winnings free of all taxes; and

Is spread betting classified a gambling activity.

Gullible.

 

[gullible]

Gullible

I quite agree with your comments. However I do believe the SB companies are not misrepresenting themselves because SB is considered gambling. I think (and I am no expert) that the casual SB just like any betting would not be subject to income tax. But it is the manner in which the SB or any betting is carried out that seems to bring the trader/gambler to attention. It should be interesting to see what happens to those out there that are actively trading arbitrage bets. To be profitable with this you need multiple accounts and a professional attitude. Could that become an income. If the IR were to consider some SB as obtaining an income from the financial markets then the same could be said of any betting. I do not know the answer yet but the common thought does seem to be the manner of income through SB when it is the sole income.

Kevin

Kevin,

Gambling winnings are not taxable on the 'gambler', casual or otherwise. Profits from carrying on a 'book making' trade are taxable. That is to say that spreadbet companies will have to pay corporation tax (they are usually ltd companies) on their profits- winnings from the punters less allowable costs. As far as I can determine the gambler is not taxed for the following two reasons:-

Gambling activity by the gambler is not considered a trade ( as opposed to a book maker who facilitates gambling) and

In English Law you can not be taxed for the same activity twice. Levy paid at source.

A source of 'income' is either taxable or not. If taxable,it is either taxed as income tax or capital gains tax. We shall ignore Inheritance Tax here.

Furthermore, I have not come across a single tax case where by winning from gambling has been deemed taxable.. Can you imagine the fun 95% of traders will have if gambling was deemed taxable. These 95% loosing gamblers (including myself) can set off losses incurred against, it-her future gambling wins or other income (eg paye).

Inland Revenue is not stupid,it will catch and punish wrong doers, but at the same time it can only act in accordance with current legislation. It will not even try to tax gambling winnings.

As an aside i believe that tax situation is not very relevant as

most gamblers (95%) loose money;

tax should be a secondary consideration; the underlying investment/punt should be given more thought to; and

i would love to pay 40% tax year in year out, even if it amounts to million pounds a ayear, cealry this would mean that I am doing something right.


Finally, I would say that always take independent tax advise and DO NOT rely on anything that I have said on this thread.

Good luck and best regards


Gullible

 

[kevin546]

Gullible

Again I agree that there is no betting tax on SB as the levy is paid by the SB company.

Obviously I WILL be seeking professional advice regarding the issue of income from SB.

My comments on the prospect of Income tax from SB come about due to the fact that no SB company will confirm that these winnings are completely free of all tax. If this were the case I would have thought they would shout it from the 'roof tops'. Instead they become uncomfortable with the conversation. Moreover others who appear to have carried out some research show the same common denominator when discussing this issue. Namely there could be problems when you have gains and it is your only source of income.

It remains to be seen if income tax can be charged on SB winners and will only be confirmed when I have obtained the appropriate advice.

However consider this, many suggest that 95% of SB clients lose, the tax man is never willing to pay for a free lunch.

If income tax were to be charged the only persons who could off-set losses would be those clients that actually have something to claim (not the 95%) so the tax man should be quite happy with this. If only SB winners were to be taxed as a 'sole trader' in exactly the same way as a professional traders dealing in shares, futures, cfd's or options I cannot see how it would not be beneficial to the tax man.

Clearly I hope I and others who have posted this are wrong because having to pay any tax on your trading earnings makes the job at hand all the more difficult to return good income. IMHO.

Good luck

Kevin

 

[gullible]

Gullible

Again I agree that there is no betting tax on SB as the levy is paid by the SB company.

Obviously I WILL be seeking professional advice regarding the issue of income from SB.

My comments on the prospect of Income tax from SB come about due to the fact that no SB company will confirm that these winnings are completely free of all tax. If this were the case I would have thought they would shout it from the 'roof tops'. Instead they become uncomfortable with the conversation. Moreover others who appear to have carried out some research show the same common denominator when discussing this issue. Namely there could be problems when you have gains and it is your only source of income.

It remains to be seen if income tax can be charged on SB winners and will only be confirmed when I have obtained the appropriate advice.

However consider this, many suggest that 95% of SB clients lose, the tax man is never willing to pay for a free lunch.

If income tax were to be charged the only persons who could off-set losses would be those clients that actually have something to claim (not the 95%) so the tax man should be quite happy with this. If only SB winners were to be taxed as a 'sole trader' in exactly the same way as a professional traders dealing in shares, futures, cfd's or options I cannot see how it would not be beneficial to the tax man.

Clearly I hope I and others who have posted this are wrong because having to pay any tax on your trading earnings makes the job at hand all the more difficult to return good income. IMHO.

Good luck

Kevin

Kevin,

I agree we appear to be addressing a grey area. I have come across a precedent in which it was judged that even if the only source of income is gambling, the winnings are not taxable. To my knowledge this test case has not bee superseded by another. Pls see one of my previous response on this thread for details of the test case.
I
Should i be fortunate to recoup my losses and start making serious money, I will only pay tax that is legally due.

As an aside, do you use any strategies that produce more winners than losers?
I seem to go through periods of good fortune, followed by losses which wipe out the profits and more!


best of luck


Gullible

 

[kevin546]

Gullible

S53 ICTA 1988.( section 53 of Income and Corporation Taxes Act 1988).
Gambling does not constitute a trade for the person gambling. Gambling winnings are therefore not taxable, and conversely tax relief is not available for any losses. Graham V Green (1925). The gambler in question did nothing else but gamble for a living.

May I ask where you discovered this info. One issue would be that while current it is somewhat dated and certainly in the UK spread betting did not really appear until late 1990's with any conviction.

It would be interesting to establish the taxable definition of a trade and that of sole trader and spread betting and income.

I will send you pm re your request as it is off topic for this thread

Kevin

 

[cc1]

The problem with tax on spreadbetting is that it is difficult to seperate people's opinions (even informed ones) from facts. This may help I hope

FACT : different tax offices adopt different approaches over whether winnings from spreadbet are subject to income tax. Some it appears say it is not taxable, some say it is taxable as it is a trade and some say that it is not taxable provided you do not trade cfd's (as then you are making a market and therefore running a business). Of course the problem with this is how many of the people in the second 2 catergories actually challenge the ruling - after all the tax man will try and get what he can - it is up to you to argue with him if you don't argree. All the peple I have heard of in the second catergory have not challenged as they say their winnings are small and it's not worth their efforts. The only person I know of in the third catergory had been presented with nearly a 6 figure tax bill for spreadbet winnings and I suspect was happy to agree to their ruling after spending considerable time arguing as at least he knew for sure that his tax bill had been reduced to zero for all future years as well as past years.

FACT: Anyone who makes considerable money at this game will tend to use cfd's instead of spreadbet as the trading costs are lower, the execution times are faster and it is easier to get a big trade on. (At least this was true until the last year as now we are starting to see the emergence of spreadbet companies who act more like brokers than traditional spreadbet companies and may be starting to turn some of those cfd players back to SB). So, in a roundabout way the tax issue has always gone away for successful traders - yes they pay more tax with cfd's but historically they have been better off paying tax as they made more to start with.

OPINION : because the big players have historically used CFD's there are only a few players in the middle ground making a living from SB alone. These people don't make enough money either to worry the tax man or alternatively to pay for expensive advice to challenge the tax man.

FACT: By careful arrangement of your trades I reckon you could only pay 6k tax on 74k winnings. This is 8%
Calculated as follows:
Income tax allowance 4,500 @0% tax cfds
Capital gains allowance 8,200 @0% tax cfds
Starting rate 2,000 @10% cfds
Basic rate 29,400 @20% cfds
Spreabet winnings 30,000 @0% (assume that between one third and half your winnings come from spreadbet.

Of course if your wife doesn't work - double it
And if you have kids you could trade in their name too (although if you want to spend it there are limits to how much you can reasonably make)
And you can set off trading costs if you arrange things properly
And there are a few more things you can do which I wouldn't want to write here

If you used all the above you could end up paying only about £12k tax on £200k and there are ways to extend this principle further.

OPINION: even if spreadbet winnings are taxable (which I don't believe there are for one minute) you can still make the best part of say £110k if you have a family at only about an average 11% tax rate. If you are making that much you can afford to set up offshore accounts and stuff so the tax issue goes away anway. So, in the real world for real traders the whole tax issue doesn't exist anyway.

Of course if you already earn into the 40% band from an employer and do a bit of trading on the side you might see things differently.

To finish this off I have declared my cfd winnings and spreadbet winnings on my tax return for the last 2 years. My cfd winnings are treated as subject to capital gains tax and my spreadbet winnings are not taxed. My spreadbet winnings are about 40% of my cfd winnnings. Last year my tax return was queried and it took the best part of 2 hours on the phone to sort out. The query related to my cfd winnings and the tax rate that should be applicable. In law this is 20% if you are over the starting rate band but they wanted 22%. At one point we got to the obtuse situation where they agreed 20% was right but said they couldn't assess me on that as their computer couldn't deal with it and they were going to use 22% anyway and I would have to appeal. In the end I got my way and they sent me a nice Excel spreadsheet specially designed for me. However, my spreadbet tax situation was never under any dispute at all. They were quite happy no tax was due.

Hope this helps. I am always interested to hear from anyone who has actually declared and been assessed on their SB winnings. This is much more valuable information than the what if scenario

 

[gullible]

cc1

Pls backup your facts with actual test cases. ALL betting winnings are free of all taxes capital or income tax. That is the whole purpose of paying a betting levy.
Should anybody have a problem with their tax inspectors pls pm me and I will reslove the situation.

rgds


Gullible

 

[cc1]

Gullible,

Sorry can't back up my facts with test cases - that wasn't the point of my post. I am unsure if such test cases exist regarding spreadbet winnings - perhaps someone else could help with this -it would certainly clear up alot of issues on this topic

But one thing does puzzle me so please correct me if I am wrong but wasn't the betting levy abolished a couple of years ago and replaced with a tax on net client losses on the betting companies ? At the time the betting companies agreed to pay a higher tax rate in exchange for the abolition of the betting levy. The principle here was that this would generate more business resulting in higher profits and therefore more tax for the government as well. I am happy to be corrected on this.

Cheers

 

[Uncle]

I think cc1 has given the facts on taxable profits superbly. Not only has he declared his winnings to the Inland Revenue, but they in turn have assessed a nil liablity on his Spread Bet winnings. This is, so far as I can recollect, the only post where someone has declared his winnings to the Revenue, and therefore, I would suggest we can now accept that S B winning ARE TAX FREE. For those of you making megga £££'s/$$$'s you should now be able to sleep easy without worrying about the Collector come knocking at your door.

John

 

[cc1]

Uncle - despite my current status with the IR I still worry. By precedent they have accepted twice with me that SB winnings are not taxable which helps me going forward but it would be good to hear from other people who have acheived the same.

 

[gullible]

cc1,

yes sorry, Gordon did repplace betting 'levy', but the pricniple that the bookmakers pay higher rate tax to still keep gambling winnings tax free. This rule has not been abolished.
There is no issue with SB winnings beeing tax free and conversely losses can not be set-off againsy other income/ capital gains.

Go amass a fortune on SB and enjoy the proceeds. !


rgds

Gullible