Can you point to an actual situation in which a real person has been obliged to pay Income Tax on their SB gains?Spread betting, index betting and binary options are not regulated by the UK Gambling Commission but instead fall under the umbrella of the Financial Conduct Authority (FCA). Despite this you do not need to pay the 18% UK Capital Gains Tax or stamp duty on winnings from Spread Betting. You also do not need to pay tax when betting on fixed odds currency and market fluctuations with bookmakers.
If however you call spread betting your primary source of income, or your day job, you may be liable to pay the tax, effectively you become classed as a trader in this scenario.
Tax on Betting and Gambling in the UK: Do you pay tax on your stake or winnings? What tax do betting companies pay? - Online Betting UK
In short for the customer there is no tax to pay on either bets or any subsequent winnings in the UK. If you are not based in the UK you may be liable for tax in your own jurisdiction if you take any winnings back to that teritory, you are advised to check in advance.www.onlinebetting.org.uk
Difference between Spread betting and CFDs
- Thread starter small_bites
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ffsear
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Petrol is highly taxed! I prefer cocaine for tax reasons
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postman
He's an accountant and he makes money from people needing phoney accounting advice.
P
postman
Of course he cant he's just a fool with a big mouth (or typing fingers).
peto
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Over the masses of spreadbetters it is less than a zero sum game. The wins of some are offset by the losses of others, and further losses occur from the bookies cut in the middle (the spread). It is a basic principle of taxation that losses may be offset against gains. And that's why we don't tax the winnings from spread betting in the uk. Because to do so would lead to revenue losses, not gains.
new_trader
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We have reached a stalemate. I suppose it’s now up to the individual to try and figure out whether or not they should pay tax on SB profits.
My closing argument is this: The criteria for paying tax on spread betting profits that have been put forward by 0FXTrader0 are wrong. They can be summarised as, “If you are doing it full time” or “If it is your only source of income” then according to 0FXTrader0, you are liable to income tax, and to avoid tax, all you have to do is say “I’m doing it for fun”.
Nothing could be more ridiculous because the HMRC aren’t that stupid.
Tax on income producing activity is NOT determined by what you say (if only it was that simple). An example of this stated in the manual where “A single isolated transaction can amount to the carrying on of a trade for tax purposes”.
To determine whether your activity is classed as “carrying on of a trade” the HMRC has provided the ‘Badges of Trade’ in the business income manual. You can find the summary here: https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim20205
Read it and make up your own mind and if you are still unsure then ask the question in the community forum of HMRC website.
My closing argument is this: The criteria for paying tax on spread betting profits that have been put forward by 0FXTrader0 are wrong. They can be summarised as, “If you are doing it full time” or “If it is your only source of income” then according to 0FXTrader0, you are liable to income tax, and to avoid tax, all you have to do is say “I’m doing it for fun”.
Nothing could be more ridiculous because the HMRC aren’t that stupid.
Tax on income producing activity is NOT determined by what you say (if only it was that simple). An example of this stated in the manual where “A single isolated transaction can amount to the carrying on of a trade for tax purposes”.
To determine whether your activity is classed as “carrying on of a trade” the HMRC has provided the ‘Badges of Trade’ in the business income manual. You can find the summary here: https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim20205
Read it and make up your own mind and if you are still unsure then ask the question in the community forum of HMRC website.
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0FXTrader0
The SB firms even have the small print written on there websites *Tax laws are subject to change and depend on individual circumstances.
So individuals can be taxed on SB's that's why they avoid them and go to the futures or spot markets and setup limited company to limit there exposure.
So individuals can be taxed on SB's that's why they avoid them and go to the futures or spot markets and setup limited company to limit there exposure.
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0FXTrader0
I think that it is pretty clear that someone who pays tax on another income source will never have a problem if they make money via spread betting. The crux of the matter really relates to an individual who makes their sole income through spread betting.
Taxes and Spread Betting
From HMRC website:
‘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.’
The way I understand it is that there is no tax on spread betting winnings. That means no tax on gains, but also means you cannot offset your spreadbetting losses, unlike ‘normal’ share/bond trading or CFDs.
Of course, the Inland Revenue (HMRC) has the power to look at tax payers’ circumstances at an individual level if they are of the opinion that someone’s circumstances are unique or rare. In this respect I have little doubt that HMRC could deem a very successful spreadbetter as being ‘rare’ if it thought that it would help their case.
Having said that, I’m confident that the case of any possible Inland Revenue investigation against the ‘professional gambler’ would rest largely on the ethical principle; that persons conducting themselves in such a way by which they gain an income which they make a living on and should thereby be obliged to pay income tax on that money. This in practice means that some tax inspectors might provide advice which is 100% mechanical in nature where another may well introduce an element of ‘ethical principle’ (i.e. is it fair that someone might earn (win) £100k and not pay a penny in tax)?
Let’s assume that you earned £50, at the weekend, stacking shelves in Tesco but, traded 12 hours a day during the normal working week. Your profits, from trading, amounted to approximately £5,000 per week and you made 10 trades each day; what would HMRC consider to be your primary occupation and income source?
The shelf stacking in Tesco’s? Unlikely, I think…
“Try giving HMRC a call and see whether you ever get a clear-cut reply. I mean, you’re hardly likely to get a nice honest person at the IR saying all perky down the phone ‘yes sir that’s correct, go and make as much money as you can and you wont owe us a penny! Good luck sir!!!'”
Although I can understand both facets of the argument I’m not sure that the ethical standard could be used in a case which went as far as court. So long as the person in question could show that he / she was following the law then they wouldn’t have a case to answer. As far as I know there is nothing in law which states that someone must ‘pay’ income tax – instead the law requires that someone is ‘assessed’ for income tax – an assessment doesn’t mean that liability is always found.
You see there’s an absolute exemption from CGT and Stamp duty, but it is a potentially grey area where income is concerned. If spread betting profits constitute subsistence income, then it could be an issue. No clear cut answer. HMRC contains the same number of unambitious clock watchers as any other government department (that is when they are not on the sick) and most tax offices will be unable to give a sensible answer. You would probably need to be subject to an investigation before your status could be sensibly considered.
Taxes and Spread Betting
From HMRC website:
‘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.’
The way I understand it is that there is no tax on spread betting winnings. That means no tax on gains, but also means you cannot offset your spreadbetting losses, unlike ‘normal’ share/bond trading or CFDs.
Of course, the Inland Revenue (HMRC) has the power to look at tax payers’ circumstances at an individual level if they are of the opinion that someone’s circumstances are unique or rare. In this respect I have little doubt that HMRC could deem a very successful spreadbetter as being ‘rare’ if it thought that it would help their case.
Having said that, I’m confident that the case of any possible Inland Revenue investigation against the ‘professional gambler’ would rest largely on the ethical principle; that persons conducting themselves in such a way by which they gain an income which they make a living on and should thereby be obliged to pay income tax on that money. This in practice means that some tax inspectors might provide advice which is 100% mechanical in nature where another may well introduce an element of ‘ethical principle’ (i.e. is it fair that someone might earn (win) £100k and not pay a penny in tax)?
Let’s assume that you earned £50, at the weekend, stacking shelves in Tesco but, traded 12 hours a day during the normal working week. Your profits, from trading, amounted to approximately £5,000 per week and you made 10 trades each day; what would HMRC consider to be your primary occupation and income source?
The shelf stacking in Tesco’s? Unlikely, I think…
“Try giving HMRC a call and see whether you ever get a clear-cut reply. I mean, you’re hardly likely to get a nice honest person at the IR saying all perky down the phone ‘yes sir that’s correct, go and make as much money as you can and you wont owe us a penny! Good luck sir!!!'”
Although I can understand both facets of the argument I’m not sure that the ethical standard could be used in a case which went as far as court. So long as the person in question could show that he / she was following the law then they wouldn’t have a case to answer. As far as I know there is nothing in law which states that someone must ‘pay’ income tax – instead the law requires that someone is ‘assessed’ for income tax – an assessment doesn’t mean that liability is always found.
You see there’s an absolute exemption from CGT and Stamp duty, but it is a potentially grey area where income is concerned. If spread betting profits constitute subsistence income, then it could be an issue. No clear cut answer. HMRC contains the same number of unambitious clock watchers as any other government department (that is when they are not on the sick) and most tax offices will be unable to give a sensible answer. You would probably need to be subject to an investigation before your status could be sensibly considered.
Is spread betting tax free is its your sole source of income?
I know that the spread betting companies say that it is a tax free product because it is classed as betting rather than trading, but do you have any knowledge of the tax mans view on spread betting for a living as a sole source of income?
www.spread-betting.com
new_trader
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The 'individual circumstances' refers to where you are resident. I know this for a fact as I have looked into what would happen to my UK tax free investments if I were to move to another county. This is why they put in the disclaimer. If you are resident in the UK your ISA and NS&I investments are tax free. If you move to another country, say Australia, then your investments are Free of UK tax, but you may be liable to tax in the juristiction of your current residence.
for the tl;dr: this is a quote directly from https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim20210
(Highlights are mine.)
‘Where the question is whether an individual engaged in speculative dealings in securities is carrying on a trade, the prima facie presumption would be that he is not.’
This is a quote directly from HMRC website not a blogger named 'David' on a commercial website.
So, IMO the question to ask in the HMRC community website should be along the lines of:
Is a CUSTOMER of spread-betting firm carrying on a trade?
Is a CUSTOMER of a spread-betting firm liable to income tax?
The bone of contention is whether or not a full time trader making a profit from speculative activity is carrying on a trade. To be continually asking if spread-betting profits are tax free is getting us nowhere.
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0FXTrader0
Its fair to say that its as rare as rocking horse shit that a SB gets taxed but all the profitable traders will choose alternatives because the SB spreads are wider the liquidity not as good, trades are not anonymous there bucketed and the counterparty risk.
new_trader
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All the examples you provide seem to mention 'sole source of income' or 'subsistence' as a criteria for paying tax. Yet I can't find that anywhere in the tax manual. I get the impression it is just assumed by those writing the articles that if you are making a living from your income it must surely be taxable. This is not the case as far as I can tell.
www.gov.uk
Income Tax: introduction
Income Tax is a tax you pay on your earnings - find out about what it is, how you pay and how to check you're paying the right amount using HMRC's tax calculator.
MasterOfCoin
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What I have most enjoyed about this thread is that every single argument, link and piece of 'evidence' posted by 0FXTrader0 in support of the stance that SB is Taxable has in fact done just the opposite and reinforced what everybody else has been pointing out all along. It's not.
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# Flat-Earthers may be liable to tax in the jurisdiction of their current residence and should seek professional advice.
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# Flat-Earthers may be liable to tax in the jurisdiction of their current residence and should seek professional advice.
😁
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0FXTrader0
A trader’s operations that cannot be regarded either, as operations of his ordinary business or as ancillary to it, should be considered independently in the light of the principles indicated in BIM20050 onwards.
If they amount to the carrying on of a trade (or produce liability as miscellaneous income) and they have some connections with the operations of the trader’s ordinary business, they may in practice be merged with it.
...So if your ordinary business is trading day in day out you bets fall into your business
If they amount to the carrying on of a trade (or produce liability as miscellaneous income) and they have some connections with the operations of the trader’s ordinary business, they may in practice be merged with it.
...So if your ordinary business is trading day in day out you bets fall into your business
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0FXTrader0
New ticket opened on the HMRC forums; lets find out the answer
MasterOfCoin
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Yes, it says the prima facie presumption would be that an individual engaged in spread betting is not carrying on a trade and is therefore not generating a business income from that activity.A trader’s operations that cannot be regarded either, as operations of his ordinary business or as ancillary to it, should be considered independently in the light of the principles indicated in BIM20050 onwards.
If they amount to the carrying on of a trade (or produce liability as miscellaneous income) and they have some connections with the operations of the trader’s ordinary business, they may in practice be merged with it.
...So if your ordinary business is trading day in day out you bets fall into your business
Another own-goal by 0FXTrader0 !
Keep it up.
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0FXTrader0
I about to pull the trigger on a Darwin which if people invested in would be taxed and as a CFD account would also be taxed. If I can confirm that trading full time and only source of income spread betting is not taxable. I will reopen spread bet account.
For two periods of several years each I have experienced zero conventional income but have continued spreadbetting through both. At no point was I advised by the SB firms (whom I informed of my absence of other income) nor contacted by HMRC with regards to taxation on SB gains.
I had already previously asked my then accountants if I could be classed as a professional trader and would therefore become liable for taxation but would receive allowance on losses - their reply was basically good luck with that mate. They saw no chance the HMRC would agree and they certainly weren't going to take the case for me - as it would fail.
rogue8
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I'd rather listen to HMRC instead of some random spread betting blog:
And of course...
0FX better join us pikeys.
And of course...
0FX better join us pikeys.
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0FXTrader0
yeah I put that HMRC post on there...I now an official SB pikey
MasterOfCoin
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And who said miracles don't happen?
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