Difference between Spread betting and CFDs

[Mysteron]

Interestingly I got an email from FXCM regarding my spreadbetting account. I can't find any more info on their website about this as they still offer new accounts for spread betting or CFD but there is no mention of the difference between a "Spread Bet Pricing Model" and an "all-in" commission free pricing model.

FXCM Pricing Notice: Discontinuation of Spread Bet Pricing Model

Your account(s) is currently under the Spread Bet pricing model. Your account will be updated to our “all-in” spread offering at ............, after market close, while keeping all your spread betting tax benefits the same. Under the “all-in” spread model your trading cost will continue to be the spread, which you can see directly on the trading platform.

 

[0FXTrader0]

If you consistently win at spread betting your better off with CFD's from a reputable broker who deliver direct market accesses with the synthetic CFD product...as you will be billed for income tax.

 

[Roberto]

If you consistently win at spread betting your better off with CFD's from a reputable broker who deliver direct market accesses with the synthetic CFD product...as you will be billed for income tax.

It never ends.

Let's just hope that anyone actually needing to know this will (unlike you, obviously) also read the 23 posts before yours, in which case they should have a reasonable chance of identifying for themselves at least two of the three different things you've just said, there, that are completely wrong.

 

[rogue8]

It never ends.

Let's just hope that anyone actually needing to know this will (unlike you, obviously) also read the 23 posts before yours, in which case they should have a reasonable chance of identifying for themselves at least two of the three different things you've just said, there, that are completely wrong.

The only party ever assessed for tax on spreadbetting profits was someone (the appellant in the case concerned) whose spreadbetting income was part of a wider trading business - in other words it WASN'T his sole income: he also sold trading signals and coaching. The court held that his entire business - including spreadbetting profits - was taxable, and it was also expressly clarified in the judgement that someone whose sole income was from spreadbetting could not be taxed on it (for neither income tax nor CGT).

I've been looking everywhere for this. Do you know the name of the high court case, @Roberto? That'll give me something in case HMRC get funny with me. Thanks.

 

[0FXTrader0]

• You don’t currently have to pay CGT on spread betting winnings because it is considered a form of gambling. Although you could be liable to income tax if your spread betting is deemed to be a trade, that is if you’re living off the profits made.

High-risk investment products | MoneyHelper

Investments that promise big returns often come with big risks. They're not illegal or scams but you could end up losing money. Read about the main types in this guide.

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It's a trade/profession when you live of the money made from trading. If spread betting was free of tax professional traders would obviously use the spread bet markets.

 

[tomorton]

• You don’t currently have to pay CGT on spread betting winnings because it is considered a form of gambling. Although you could be liable to income tax if your spread betting is deemed to be a trade, that is if you’re living off the profits made.

High-risk investment products | MoneyHelper

Investments that promise big returns often come with big risks. They're not illegal or scams but you could end up losing money. Read about the main types in this guide.

www.moneyadviceservice.org.uk

It's a trade/profession when you live of the money made from trading. If spread betting was free of tax professional traders would obviously use the spread bet markets.

As ever, the way to prove that SB income is taxable is for someone who uses SB and pays tax on their profits to step forward. It never happens.

 

[timsk]

. . . If spread betting was free of tax professional traders would obviously use the spread bet markets.

OFXT,
What makes you think that they don't?

I doubt that spread betting firms could survive off the high turnover of small retail traders who, for the most part, don't have a pot to pi$$ in. You know that warning statement that most/all spread bet ads carry - something along the lines of: "76% of all spread betting accounts lose money"? Well, my guess is that of the 24% who do okay - a good many of those will the pros and institutions.
Tim.

 

[0FXTrader0]

As ever, the way to prove that SB income is taxable is for someone who uses SB and pays tax on their profits to step forward. It never happens.

Because most traders who are profitable have spoken to their accountant and structured there affairs so they are compliant with HMRC.

 

[0FXTrader0]

That 24% that you say do ok are losing traders as well the vast majority of. All the 24% have done is keep their account from a negative balance for a 4 quarter lookback.

 

[1nvest]

• You don’t currently have to pay CGT on spread betting winnings because it is considered a form of gambling. Although you could be liable to income tax if your spread betting is deemed to be a trade, that is if you’re living off the profits made.

High-risk investment products | MoneyHelper

Investments that promise big returns often come with big risks. They're not illegal or scams but you could end up losing money. Read about the main types in this guide.

www.moneyadviceservice.org.uk

It's a trade/profession when you live of the money made from trading. If spread betting was free of tax professional traders would obviously use the spread bet markets.

HMRC case law clearly states otherwise. It gives examples of what is considered a trade, and the act of trading or the act of gambling is not one of them.

 

[0FXTrader0]

If your paying your mortgage and monthly living expenses from profits gained from trading you are engaged in a trade. If you are in employment or run a business and supplement your income with spread betting wins that is tax free and not a trade.

 

[tomorton]

Because most traders who are profitable have spoken to their accountant and structured there affairs so they are compliant with HMRC.

You must surely have some evidence that some traders using SB pay tax on their winnings? Without evidence its just a suspicion.

 

[0FXTrader0]

They don't spread bet because they have been advised that there trading would be deemed taxable by HMRC. When your positioned to profit over a 2yr+ period your activities will start to fall into a trade category. Most spread bettors lose and yes 24% hold water over 4 quarters but over the years 99.9% of these accounts lose so they will never pay tax.

 

[1nvest]

If your paying your mortgage and monthly living expenses from profits gained from trading you are engaged in a trade. If you are in employment or run a business and supplement your income with spread betting wins that is tax free and not a trade.

and you would be wrong

 

[0FXTrader0]

the 0.1% of traders paying tax and structuring there business correctly don't need to prove anything look up: SIC CODE 64991

 

[0FXTrader0]

and you would be wrong

So your saying the government is wrong and the legion of accountants is wrong and you are right?

 

[1nvest]

So your saying the government is wrong and the legion of accountants is wrong and you are right?

No, I'm saying HMRC are correct, thats why i've quoted them.

 

[0FXTrader0]

WIth respect what you have done is compiled all the evidence from HMRC that supports your point. Tax is not a black and white subject. Consult financial and tax experts and the answer will always be: if your consistently profiting from any spread bets your liable for income tax

 

[tomorton]

They don't spread bet because they have been advised that there trading would be deemed taxable by HMRC. When your positioned to profit over a 2yr+ period your activities will start to fall into a trade category. Most spread bettors lose and yes 24% hold water over 4 quarters but over the years 99.9% of these accounts lose so they will never pay tax.

Can you produce any evidence of a profitable spreadbetter who has paid tax on their winnings?

 

[1nvest]

WIth respect what you have done is compiled all the evidence from HMRC that supports your point. Tax is not a black and white subject. Consult financial and tax experts and the answer will always be: if your consistently profiting from any spread bets your liable for income tax

No, what ive done is provided evidence, which unfortunately you haven't provided anything to substantiate your claim. I know tax isn't black and white, ive been fortunate to study it for years