FuturesBetting? Holy Moly !!

[new_trader]

People are always saying that spread betting can be taxed if it is deemed 'professional'. This is just not true and it will never be taxed.

The simple reason is that we all know more money is lost than made in spread betting so if it were taxable, losses would have to be tax deductable and the Inland Revenue would incur a net loss.
That just ain't gonna happen...

In addition, tax is deducted on every bet anyway so they won't tax you again.

I'm not sure if this is just your opinion but if that was the 'simple' reason then ALL trading would be tax free.

You pay taxes on PROFITS. You don't get money back on losses. It's that simple. The inland revenue never incur's a loss. They either get more taxes from you or none. The only time you get a tax refund is if you have been over-taxed. That doesn't happen in trading because in theory you will only send a cheque to the IR if you make a profit. Most people don't pay taxes spread betting because most either lose money or haven't bothered to research facts and just prefer to go with consensus.

In addition, tax is deducted on every bet anyway so they won't tax you again.

This is also a load of rubbish. I pay income tax on the wages I earn and the company I work for also pays company tax.

 

[£10kLoser]

I'm not sure if this is just your opinion but if that was the 'simple' reason then ALL trading would be tax free.

You pay taxes on PROFITS. You don't get money back on losses. It's that simple. The inland revenue never incur's a loss. They either get more taxes from you or none. The only time you get a tax refund is if you have been over-taxed. That doesn't happen in trading because in theory you will only send a cheque to the IR if you make a profit. Most people don't pay taxes spread betting because most either lose money or haven't bothered to research facts and just prefer to go with consensus.

All trading is not tax free because it is not classed as betting and betting tax is not deducted at the brokers - as it is with SB. Tax is paid on spread betting but not by us.

Of course losses are tax deductable. trading is a business like any other and expenses are taken from income to arrive at a taxable figure. If this figure is negative, then it can be carried over to next year.

Most spread bettors have a full time job and any losses would be tax deductable from their regular income.

Your reasoning is way out - your company pays tax on ITS profits so of course they are taxed. You pay tax on your profits (wages). Your company makes contibutions based on your wages but that is not income tax.

 

[new_trader]

All trading is not tax free because it is not classed as betting and betting tax is not deducted at the brokers - as it is with SB. Tax is paid on spread betting but not by us.

Of course losses are tax deductable. trading is a business like any other and expenses are taken from income to arrive at a taxable figure. If this figure is negative, then it can be carried over to next year.

Most spread bettors have a full time job and any losses would be tax deductable from their regular income.

Your reasoning is way out - your company pays tax on ITS profits so of course they are taxed. You pay tax on your profits (wages). Your company makes contibutions based on your wages but that is not income tax.

If most spread betters have a full time job then your argument about why and when taxes are paid practically invalid. I know money won from gambling is tax free. This means if I have a full time job and win £1000 at a Casino on Saturday night I don't pay any taxes on those winnings. Also, if I lose £1000 on Saturday night I can't offset that against the taxes I pay from the wages I earn in my full time job.

This is COMPLETELY DIFFERENT to quitting my full time job and earning my entire income from gambling. The term 'professional' in the eyes of the Inland Revenue does not mean how much of an expert you are at something. They define 'professional' by how you earn your income. If you earn your entire income from gambling then you are a professional gambler. The debate about whether you pay taxes in this situation is STILL open to debate.

 

[£10kLoser]

I don't believe it's open for debate at all. the notion of a 'professional' gambler paying income tax is just a rumour as far as I'm concerned. Does anyone know from first hand experience of a gambler having to pay tax? I don't think so. Why do you state that a 'professional' gamber pays tax?

The law on tax is the law and does not specify degree. So, in your reasoning, a 'professional' earns their entire income from gamblimg. So, what if he earns £1 from a normal job?

Also, money lost by the 95% at trading goes to the 5% who win. Therefore ALL money used in trading is taxable (although it may be below the threshold). With spread betting, the money from the 95% who lose goes to the SB company where a percenetage is lost in expenses. OK, we know they make huge profits, but as far as the tax man is concerned, they are just another business and may swallow all their income in expenses. So, not all SB money is taxable.

 

[new_trader]

I don't believe it's open for debate at all. the notion of a 'professional' gambler paying income tax is just a rumour as far as I'm concerned. Does anyone know from first hand experience of a gambler having to pay tax? I don't think so. Why do you state that a 'professional' gamber pays tax?

The law on tax is the law and does not specify degree. So, in your reasoning, a 'professional' earns their entire income from gamblimg. So, what if he earns £1 from a normal job?

Also, money lost by the 95% at trading goes to the 5% who win. Therefore ALL money used in trading is taxable (although it may be below the threshold). With spread betting, the money from the 95% who lose goes to the SB company where a percenetage is lost in expenses. OK, we know they make huge profits, but as far as the tax man is concerned, they are just another business and may swallow all their income in expenses. So, not all SB money is taxable.

The problem is that you are not 'listening' to me.



"I don't believe it's open for debate at all. the notion of a 'professional' gambler paying income tax is just a rumour as far as I'm concerned."

You see, this isn't a fact it is an opinion and everyone who talks about spread betting and tax is giving exactly that, their opinion. Just like me, I am giving you my opinion about spread betting based on other facts that I was told. The difference being that I am not asserting my opinion about spread betting and tax as if it is a fact, whereas you and most spread betters who only have an opinion talk about spread betting and tax as if it is a fact.

I am not arguing about what YOU think is a normal job and what YOU think is professional, I am saying in the eyes of the Inland Revenue. Just like people who do contract work. In the eyes of the Inland Revenue, if they work as a contractor for the same company for more than 11 months they will be considered a FULL TIME employee. It doesn't matter what the company thinks or what the contactor thinks, all that matters is what the Inland Revenue thinks.

 

[oiltanker]

>>tax is giving exactly that, their opinion<<

i have spoken in person to the head tax expert in the uk inland revenue head office on the telephone. Spread betting is not taxable even if full time. he also sent it to me in writing. you can't even call yourself self employed because that requires a specific tax return.

just because spread betting is based on financial markets does not make it the same as trading in financial markets

 

[£10kLoser]

Thank you, oiltanker!

Funny how people come up with all sorts of BS about this - it's like anyone who uses spread bet companies WANT to believe the worst.

 

[new_trader]

>>tax is giving exactly that, their opinion<<

i have spoken in person to the head tax expert in the uk inland revenue head office on the telephone. Spread betting is not taxable even if full time. he also sent it to me in writing. you can't even call yourself self employed because that requires a specific tax return.

just because spread betting is based on financial markets does not make it the same as trading in financial markets

Even though you spoke to them in person on the telephone I think I will speak to them in person on the telephone myself and find out. According the HM Revenue & Customs website, spread betting wins appear to be taxable under certain conditions.

BIM22020 - Trade: exceptions & alternatives: betting and gambling: spread betting
The principles of Down v Compston [1937] 21TC60 and Burdge v Pyne [1968] 45TC320 (see BIM22019) apply equally here. 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 this see CFM13214.

 

[mechtraderpro]

As far as I’m concerned there is no tax to pay for anyone living as a “professional” spread-better. “Professional” in the eyes of the IR, is someone who does the job of there choice to make a living or part of there living. (Main income or not does not enter into it)

If you do spread betting and another job, then you will be taxed at source for your employment or taxed SA if you are self employed. Your income from the spread side is tax “exempt” as it is gambling and is taxed at source (spread company)

I was pulled by the IR 2 years ago, and was asked for any records that I had, I told them that “yes” I have records of my income, but refused to hand them over, as I was NOT obliged to keep records, as I was NOT self employed . ..This of course slightly angered them !!. And asked me to attend there office for further talks !.. Of which I duly attended.

I explained to them that I do not have an “employed job” neither am I on record as being “self employed” or “ un- employed “… so asked them what they actually would class my line of work ?

With this came the reply " I will have to check" to find out what the situation is !! please wait for me to return !... ok said me …after 10 minutes he returned… as far as we are concerned then we should want to see your records as we would class you as self employed !!!...the discussion went on as I repeatedly asked which “TAX RULE” are you quoting for me to be classed as “self employed” ( he could not tell me this) and avoided the reply on many occasions.

What are you worried about he said, looking at my concerned face !! Well I replied in 2001- 2002... I made some rather large losses at being “self employed”

Well perhaps we should look at your records then ! Ok.. Let’s look shall we ! After all I don’t want to be seen as “avoiding” a tax that is due do I !!! :innocent:

So he duly disappeared again this time with my records …. Then comes back to me and says
“ Just two questions” Yes I said in reply …. In 2004 you purchased a very expensive new Jaguar for £00,000s. Yes I did,… What is your second question ?…He replied .. “ Do you Know how fast it goes” NO I replied as he handed my records back. “Well” he said,,, Lets see how fast you are at leaving !....

I then, a few weeks later, was presented with a letter from them, saying that the inspector that I had a discussion with on that date was “ Not correctly informed” and there was no need for me to either file a “self assessment” or to keep records as long as this was my sole source of income of any kind. Any other income must be declared either through the “PAYE” or “self assessment” system

Never heard anything from that day…:clap: although I still keep records just in case !

 

[cryten]

“ Just two questions” Yes I said in reply …. In 2004 you purchased a very expensive new Jaguar for £00,000s. Yes I did,… What is your second question ?…He replied .. “ Do you Know how fast it goes” NO I replied as he handed my records back. “Well” he said,,, Lets see how fast you are at leaving !....

LOL!!

Thank you mech that gave me my first chuckle today 😆

 

[raysor]

Sorry to open an old thread but I have been reading through with interest. In the argument about taxation, firstly the Inland Revenue is always right! so I wouldn't try to be too smart with them. As I understand it SB (and gambling) is free of capital taxes, i.e CGT. If these gains (and losses) that are exempt, are treated as income (i.e. earnings from a trade or profession) then, like any other income, will be taxable.

 

[Vaco]

this has been done to death on other threads.

spread betting profits are non taxable, even if you have no other money coming in.

 

[raysor]

this has been done to death on other threads.

spread betting profits are non taxable, even if you have no other money coming in.

Quote from IG Index website: "All your profits are absolutely free from UK capital gains tax"

Note the wording.

 

[Vaco]

when you start trading for a living i'm sure you will let us know if you have decided to pay tax or not 😉

 

[raysor]

when you start trading for a living i'm sure you will let us know if you have decided to pay tax or not 😉

I don't think one "decides" to pay tax!!

 

[Vaco]

As I understand it SB (and gambling) is free of capital taxes, i.e CGT. If these gains (and losses) that are exempt, are treated as income (i.e. earnings from a trade or profession) then, like any other income, will be taxable.

If you look at how the inland revenues website defines trade or profession you will see that spread betting and gambling in general do not fall in to that definition regardless of how consistent I am in making or losing my money. Gambling with a profitable system is still gambling. The downside is that if this is all you do for your money you will be unable to obtain any form of credit, mortgage etc as you effectively have no income.

 

[bootsyjam]

Spread betting is tax free!!

Fair point r.e. facts and beliefs-some people can't believe that spread betting is tax free, but the simple fact remains that it really is.
Perhaps this explanation will help. I think people get a bit confused because:
a) if you're good at it it's like having an income/wage
b) you're putting money on shares/indices/currencies etc that normally would attract Capital Gains Tax here in the UK.

To answer point a), it might feel like income but the taxman does not treat it as such because, and here is the answer to point b) that makes the difference: YOU DO NOT PHYSICALLY OWN THE ASSET WHEN YOU SPREADBET.

Sorry for the caps both in that previous point and beyond but these points are vital to understand, and I think that people who think they have to pay CGT don't actually understand what spreadbetting companies actually do.

They effectively create markets that SHADOW the real markets, be it in individual shares, currencies, commodities, whatever. The prices are very close to the real market price but are NOT the real market price. When you go long on Eur/Usd for £1 a point, YOU ARE NOT IN PHYSICAL OWNERSHIP OF THAT CURRENCY. You are using the spreadbetting company's shadow market price and market that FOLLOWS the real price closely, but you do not actually take ownership of anything. If the spreadbetting company then decides cover themselves from this risk and also buys Eur/USD at 1 point in the actual currency markets then they will become liable for tax (although not sure if it is CGT or income tax) because they will take physical posession of one microlot (or whatever the lot size is) of that particular currency/stock etc.
Hope that helps to clear the waters a bit.

 

[Jack o'Clubs]

...point b) that makes the difference: YOU DO NOT PHYSICALLY OWN THE ASSET WHEN YOU SPREADBET.

Sorry for the caps both in that previous point and beyond but these points are vital to understand, and I think that people who think they have to pay CGT don't actually understand what spreadbetting companies actually do.

Your answer to point b) is not really true - you can trade cash-settled futures, ie index futures, which also imply no physical ownership of the asset, and profits/losses are allowable for tax. Also CGT isn't the issue as traders would be subject to income or (depending on set-up) corporation tax.

To be honest I don't know why newbies get so worked up about this, since getting to a point where tax is an issue at all is the first hurdle! If you believe the '95% are losers' rule, most would be better off not spreadbetting as at least the losses could then be set-off elsewhere!

 

[bootsyjam]

Yes Jack, but you are dealing directly into those markets, that's the point I'm trying to make. By doing so, anything that is deemed taxable in the markets by the govt is not so when using an SB firm because you are not buying and selling directly within these taxable markets. Your point that "index futures...also imply no physical ownership of the asset" is correct, but the govt views it as a taxable asset if you deal directly in this market, but doesn't if you SB, so that's enough for me.
If you spreadbet, you remove yourself from actually owning this taxable asset as you are using the shadow market as I explained.
Can you explain your point r.e. income tax? What income tax? There is none if spread betting, nor is there CGT!!

 

[raysor]

As you have all said there is absolutely no question of CGT on spread betting or any other form of betting. To pay CGT you have to make a disposal of a capital asset at a profit. When you bet on a horse, you don't buy the horse at the start of the race and then sell it it at the end of the race at a profit!

With assets that are liable to CGT you don't have to take possession of the asset. You could buy shares for T+3 or whatever and sell with the same settlement. You would be the owner of the asset at some point but would never be on the share register, but would be liable for CGT if there was a profit on the disposal.