I BET not a lot of people know this !!!

[adalat]

Hi every body just came across this and hope it answers a question i think we have misunderstood,

Spread Betting as a Tax-Efficient Trading Product


Q: So is Spread Betting really tax-free?

A: Spread Betting is only tax free if it is not your main source of income. For that reason it is probably not wise when opening a spread betting account to put your job description down as 'day trader' or 'trader' as it would then be rather difficult to claim at a later date that trading was not your main income if the IR was to query where you made your money!!!

I spent ruddy ages trying to establish the position of spread betting with the revenue, and in the end it was pretty clear - perhaps this will ring true with those who have investigated this with the revenue themselves? If you have a 'subsistence income' (i.e. enough to live off) from an independent source that you pay tax on, then HMRC can't tax you on your spreadbetting activities. It's only if you have no other source of income and you use it for your primary income source that the tax advantages may disappear. Spoke to the revenue office in Nottingham with a technician there, who specialize in people who make a living from gambling, so I guess he knows his stuff. He deals with people playing the horses, dogs, poker, even casino games (!)

 

[Hoggums]

This has been debated many times on T2W and the discussions have been largely inconclusive.

However the general consensus is that SB will not be taxable even if it is your main source of income because otherwise you will be able to offset losses and expenses against this tax. There is no legal precidence or case law for it to be taxable as far as I'm aware. What would happen if you made a profit and were taxed one year but then made a loss the next. Could you claim back some of the tax?

From the rule book - SB'ing is only taxable if you are getting income from the business of spread betting - not as a punter placing bets. The law does not stipulate that it becomes taxable once it becomes > 50% of your earnings and the concept of subsitence income is largely subjective. I could invest my winnings in a savings account which I pay tax on - if the interest is a couple of hundred a month I could claim that is subsistence income..?

 

[tomorton]

Advice from my accountant tallies with what Hoggums says - if betting (or trading) is your main income, it could be income taxable, but not automatically, and IR are likely to resist efforts to get yourself into this bracket.

Of course, share trading is already potentially taxed for everyone, even if gains are not your main source of income, as a result of Capital Gains Tax. I understand that IR resist efforts by people who are clobbered for CGT to move such gains into the income tax regime as overall they lose much revenue as a result.

This could help explain their reluctance to income tax spreadbetters: a successful spreadbetter, by IR logic (not mine) could presumably quite readily shift into share dealing from spreadbetting and claim the income tax situation should follow them, costing the IR CGT.

 

[anley]

Put it this way if anyone makes their living from spread betting then a) keep it very very quiet, and b) save a high proportion of your winnings so as to pay the tax man if/when he comes looking. Remember, the tax man can change the rules as they go along within reason.

Also, plenty of professional horse gamblers pay tax on their winnings as they're deemed as 'professional' and if you think about it it's very easy to prove.

 

[£10kLoser]

Also, plenty of professional horse gamblers pay tax on their winnings as they're deemed as 'professional' and if you think about it it's very easy to prove.

Name one.

I hear this often but does anyone know for sure?

The fact is that tax is paid on every bet, win or lose, by the bookmaker, so there is no need to pay it again. This area is just full of unsubstantiated rumours and repeated myths. Winnings from gambling is tax free, end of story as far as I'm concerned.

How come we never actually hear from anyone who has paid tax on gambling profits - only from people who 'know of people' who do?

 

[Skill Leverage]

I personally know 2 professional poker players who have accountants to fill out returns, they pay income tax. Might be slightly different as I think the Inland Revenue regard poker as slightly separate from gambling, but I'd imagine horse betting could be in the same 'educated bets' sort of arena.

 

[Black Swan]

Name one.

I hear this often but does anyone know for sure?

The fact is that tax is paid on every bet, win or lose, by the bookmaker, so there is no need to pay it again. This area is just full of unsubstantiated rumours and repeated myths. Winnings from gambling is tax free, end of story as far as I'm concerned.

How come we never actually hear from anyone who has paid tax on gambling profits - only from people who 'know of people' who do?

It's not taxable.

 

[gamma]

Also, plenty of professional horse gamblers pay tax on their winnings as they're deemed as 'professional' and if you think about it it's very easy to prove.

I might be wrong here so please kick me if I am.
The few times I have placed a bet on the Grand National the the bookie advised me to pay the tax upfront by adding a extra 15 % to the bet.
Is this not the tax element of if it?

 

[Hoggums]

Wasn't that when there was a 9% betting tax. You either paid the 9% upfront on the bet or you paid the 9% on the winnings - your choice... That tax has now been abolished.

Read this thread - there's a lot of pertinent information there....

TaxationWeb Ltd • Professional Gambler & Income Tax : Income Tax

The conclusion of the thread is that there is NO tax to pay backed up by case law from 1937. However there are one or two who disagree....

 

[anley]

Name one.

Simon Norris. Lives and works in Newmarket. He's in his late 50s, used to be a bookie but retired about 10 years ago. He's my brother's brother in law.

Told me that as soon as he went pro, ie he had NO other source of income apart from investments which tax had to be paid on anyway he was advised by his accountant to seek a meeting with the Inland revenue to explain his situation and work out a deal.

People who play games with the taxman, especially when they think they're being overly clever normally always lose. In fact that's one bet I'd do at short odds EVERY DAY...........

 

[stevespray]

This has been widely debated already and no hard and fast answer has been found.

A senior tax inspector at my local office could not advise me either way. He did advise me that a "Profesional Gambler" lived in my tax office area and that the IR assesed his tax situation based on a profit and loss sheet "just like any other professionally run business"!

At the moment I also run a small business and that provides my 'subsistance allowance' and therefore my spreadbetting activities are almost certainly gambling and not taxable.

I've researched these matters at some length. I've get to find a case where the IR have taken someone to court on this matter and win. This implies that either the IR comes to an arrangement with a punter or that the IR dont have a policy of pursuing punters if they refuse the IR's instructions to pay tax.

Case law on these matters is extremely old.

I was at a seminar in London around 8 years ago where someone from one of London's leading SB Co's stated catagorically that a client would never have to pay a penny in tax from a spreadbet win regardless of circumstance - he offered the name of a firm of lawyers who he said would take great pleasure in defending you if the IR tried to tax you.

This is a rare case where I think I'd ask the IR to 'put up or shut up' if they tried to tax me.

Steve.

 

[adalat]

Thanks every body, for all your thoughts on this inconclusive matter.

 

[Skill Leverage]

Thanks every body, for all your thoughts on this inconclusive matter.

Hahaha this looks very much like diplomatic speak for 'You're all sh!t'.

 

[adalat]

With no disrespect, skill Leverage, that may be your assumption. I respect all contribution, knowing that all those that contributed, gave time and effort to this query, which ethically deserves a thank you. When you are lost and ask somebody for directions, you thank them, it is just common courtesy. The members contribution to any query is no different, it doesn't cost much to say thank you.It comes under manners, ironically which some of us fail to use at times. I thank everybody once more.

 

[N Rothschild]

IR can get my tax when they pry it from my cold dead hands!

 

[Skill Leverage]

With no disrespect, skill Leverage, that may be your assumption. I respect all contribution, knowing that all those that contributed, gave time and effort to this query, which ethically deserves a thank you. When you are lost and ask somebody for directions, you thank them, it is just common courtesy. The members contribution to any query is no different, it doesn't cost much to say thank you.It comes under manners, ironically which some of us fail to use at times. I thank everybody once more.

Was definitely a joke on my part, I thought the 'hahaha' bit made that clear, but apologies if you didn't take it as such.

 

[Hoggums]

Apologies aside, it still doesn't escape the fact that we all are sh1t.

 

[adalat]

SKILL LEVERAGE, On the contrary friend, my apologies for missing the joke bit. No offence taken. Wishing you a nice evening.

 

[raysor]

As usual lots of ill-informed replies (probably including mine!)
What we DO KNOW is that there is categorically 100% NO CGT on ANY form of betting and that obviously includes spread betting.

To be self employed or a "professional" gambler or anything else surely it does not matter if you have other income or not. That's not an issue. Maybe it would have to be your main form of income.

You can pay tax twice. If you own and are employed by your company, the company will pay corporation tax on it's profit and you will pay income tax on your salary or dividends.

 

[fifty2aces]

You can pay tax twice. If you own and are employed by your company, the company will pay corporation tax on it's profit and you will pay income tax on your salary or dividends.

Actually salaries are an expense for the company, so can be offset against profits to reduce the tax burden, effectively meaning salaries aren't double taxed.

As for the tax-status of spreadbetting, just don't take advice from an internet forum - assume the worst (that you may have to pay) and hope you're wrong. If you're in a position where this is an issue, speak to a professional.