Novembers Traders Mag Article 'Tax on Spread Betting'

[Roberto]

Basically Graham v Green [1925] would seem to be the relevant case law of this issue.

It might if you were very out of date, yes. Sid, are you seriously suggesting that professional horse-race backers who make profits don't have to pay income tax if it's their sole income? With respect, this view would be sadly mistaken.

 

[chump]

I am thinking of changing my signature to this....Consult an Expert ........then when it is wrong you have somebody to blame

 

[Roberto]

I am thinking of changing my signature to this....Consult an Expert ........then when it is wrong you have somebody to blame

You're not wrong

Further, you should probably use your full name of "Consult An Expert With Relevant Experience In The Specific Field Under Discussion"!

Sorry if my posts above are strongly worded. Having spent a lot of time and effort in investigating this tax position re SB, I'm just fed up to the back teeth of opinionated people who simply don't know what they're talking about pretending to have expert knowledge!

 

[sidinuk]

It might if you were very out of date, yes. Sid, are you seriously suggesting that professional horse-race backers who make profits don't have to pay income tax if it's their sole income? With respect, this view would be sadly mistaken.

If there is any case law that supersedes Graham v Green then please let us know, and the Inland Revenue who are still quoting it as relevant.

Sole income is no test as to whether something is taxable or not. If someone who does not have any other form of income plays the lottery every week in the hope that their numbers come up actually wins £20,000,000, are you saying that because that is their sole income it should be taxable? That's nonsense, each source of income is judged on it's own merits, it makes no difference what other income is available.

Another example: You sell the family home and make £100,000 profit and move into a rented flat using the money from the sale to live on for a year. So your sole source of income (plus a bit of interest which is taxable) is from the sale of the family home - is this now taxable? Of course not.

 

[Roberto]

If there is any case law that supersedes Graham v Green then please let us know

I haven't practised law for more than 25 years, Sid, and I'm not trying to give legal or accountacy advice. I am not an expert and don't pretend to be one. I take appropriate expert advice when I need it, and I act on it. However, I actually know 2 people who pay income tax on gambling winnings at the moment because it's their sole income and they can't therefore deny that they do it for a living . And I've known one or two more in the past, as well. Let's just agree to disagree, ok?

 

[tradingknowledge]

In France many people have been requalified by IRS so if they change the law so that it's fuzzy enough to interpretation they can let people run several years and they then ask by surprise to pay the taxes.

The current inland revenue assessment of the situation is summed up in this part of the inland revenue inspectors manual:

http://www.inlandrevenue.gov.uk/manuals/bimmanual/BIM22015.htm


Basically Graham v Green [1925] would seem to be the relevant case law of this issue. A bookmaker is carrying on a trade whereas a 'professional gambler' is carrying on a habit. A trade is taxable, a habit isn't.

Until the law is changed, gambling profits are tax free for the punter. The chancellor did announce a review of betting exchanges in the last budget though, so things could change. I still don't think that would affect the average spreadbet punter though.

 

[SallyT]

Roberto,

Thanks for the idea of an offshore company, certainly worth considering.

Yes, pm me anytime.

Sally.

 

[Roberto]

If there is any case law that supersedes Graham v Green then please let us know, and the Inland Revenue who are still quoting it as relevant.

Wrong. They are not "quoting it as relevant". They are quite correctly referring to it as the case which established the original principle that betting winnings were not, prima facie, taxable for income tax. Since then, the position has been differentiated IN THE CASE OF PEOPLE WHOSE SOLE INCOME IS FROM GAMING. _That_ is what's "relevant" here, because that's what we're discussing.

Sole income is no test as to whether something is taxable or not.

Wrong again. You will bring this forum into disrepute if you dispense such wildly inaccurate "advice"! The significance of its being "sole income" is simply that when it is, you can't deny that it's how you make your living. That's why it becomes liable for income tax, in spite of the court's ruling in the antiquated case you mention. That's what 2 tax inspectors and 2 specialist accountants have recently told me, and without wishing to offend you, I prefer to rely on their advice than yours, Sid.

If someone who does not have any other form of income plays the lottery every week in the hope that their numbers come up actually wins £20,000,000, are you saying that because that is their sole income it should be taxable?

Nobody is suggesting anything so ridiculous. But if (very theoretically!) someone WON the lottery every week, and was seen to be playing the lottery for a living, the position might be different. That's clearly a completely unrealistic example, but we have RIGHT NOW a situation in which professional horse-race backers are assessed for income tax on their profits, and have to pay it. This is simply unarguable fact. I know some of these people and have read their correspondence with the Revenue about it. One of them was tied up in litigation for 18 months over it, and lost.

... each source of income is judged on it's own merits, it makes no difference what other income is available.

I agree with this sentence! It's not about "what other income is available". It's about WHETHER ANY other income was available in the tax-year in question. If it wasn't, then gaming was the means by which the person earned their living during that tax-year.

If the situation is as simple and clear as you seem to imagine, why on earth do you think trading magazines are publishing articles about it? And saying that it's not necessarily? This is surely what you, and others who might agree with you, should be asking yourselves?

Sorry, Sid, we are simply going to have to agree to disagree on this whole subject.

I don't mean it rudely, but I'm tired of arguing about it here.

I urge other readers who might end up in this situation (from SB, not horses, I mean!) to take _expert_ advice as I have done, and not to rely on the opinions of the people who post here! Not even on mine

 

[602511]

no tax?

back in 1990 when all my gambling was done on the racecourse in cash i had a couple of propertys and was finding it hard to pay the high interest rates so to keep things from going under i started paying in the sums i won to service the debt as the rents were not covering the loans,it was all above board, the tax man called a investigation as my declared incomings did not cover my outgoings, i did keep records of all bets but he worked out the rents on a full 12 month lets for the propertys as i told him they were bedsits with students in and there are plenty that do not pay and the rooms are empty for weeks if not months, not many were renting property out then so voids was not what he understood, he took my winnings as rents, he taxed me for undeclared income and i had to settle after many months for about 4k, to this day i have never placed cash in a bank account again, so tax is payable if you cannot prove where the cash comes from and the tax man thinks no one wins but the bookie.

 

[chump]

LOL............."Further, you should probably use your full name of "Consult An Expert With Relevant Experience In The Specific Field Under Discussion"!"

Roberto,
Just to expand on the above for the sake of those who may not yet understand this...consulting an 'expert' might, I say just might, improve the probability of you getting 'better' advice on the issue in question...however, most people don't consult experts on this basis..they do so to get the 'right answer ..if you explore the limitations that impact on getting a 'right' answer then you might seriously ask the question why bother to consult unless you are willing to adopt an approach based on probability ....am I inspiring anyone with confidence yet ?

For example , your notions of an offshore company..you can consult a thousand different accountants and you will be no nearer to removing the uncertainty of your situation than if you simply consulted one....why ? ....because those accountants are not the source of the decision making process...by consulting them you are in effect asking them to adopt the the interpretative process that will be undertaken by the Inland Revenue ... the outcome they present to you is simply one of probability ,but will that be of any interest to you if the process were in the fullness of time given a different outcome when interpreted by the Inland Revenue ?

For clarity, in this situation you might outline your intentions and ask the Inland Revenue for a ruling thereafter you have the ability to rely on that ruling as opposed to a probability based assessment of what it 'should' be....if you do otherwise you run the risk of having a 'black swan' crap all over your accountants advice...that's my 'expert' advice ...LOL

The area of concern for your plan will be the interpretation of your activities within the scope of what the Inland Revenue assess to be the 'establishment' of a business here in the UK....if they rule that those activities have established a controlling presence here then you will be invited to set up onshore .....frankly as a trader making all the trading decisions ,controlling the movement of funds etc whilst still doing so physically within the UK..I think you are 'stuffed' ,but as I say consult an 'expert'

 

[Timnotnicebutdim]

Could someone answer this question.

If it was deemed by the tax inspector that your spread betting gains will be taxable,what if that same person had a wife with a spread betting account(she also has a job)who had an extremely large gain from that account(in the same commodity as what the husband trades in but hardly traded,just an open position)would her profit be deemed to be taxable because of her marital status to taxed husband.

what do you think?

 

[chump]

Issues of whether she is taxable on her activities is one question....the question you ask....
"deemed to be taxable because of her marital status to taxed husband."...is separate...marital status is now completely irrelevant within the context of your question..

 

[Roberto]

... if they rule that those activities have established a controlling presence here then you will be invited to set up onshore ...

I'm sure this is right (as indeed are your other points well taken ... that's to say, I agree with them anyway ) but there are perfectly lawful ways of making such a ruling impossible for them. If you actually owned the company yourself, you would indeed probably be stuffed in the long run. But there are other possibilities also.

 

[chump]

Roberto,
LOL...I know the other ways...none of this is ironclad although it is often 'sold' as such. ...it does not matter what you end up doing as long as you do it from a position of having as much of the pertinent information given to you as possible thereafter it's your decision and your accountability..the problem with this is oft 'experts' in giving you this information will be shooting themselves in the foot re their fees...remember when the black swan 'dumps' it won't be on the 'experts' ...I could write a book about this..now there's an idea

 

[Roberto]

...it does not matter what you end up doing as long as you do it from a position of having as much of the pertinent information given to you as possible thereafter it's your decision and your accountability ...

Can't argue with that. People often don't realise that they remain responsible for the consequences of their decisions, whatever advice they took beforehand. Write your book, and T2W might sell it through the online shop.