"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"
In my view, the meaning of "the carrying on of that trade" has wide scope in meaning and the word "trade" can be substituted with "services"; or "business". The scope of the Inland Revenue is to tax income from business activities and "spread betting" can be caught within that net if the activity of spread betting is deemed part of carrying on of that trade rather than as a gambling activity.
Originally I interpreted the "carrying on of that trade" to mean full-time spread-betting. However, I now think it means if you run a spread-betting firm and also take a punt on the markets while running the firm, then your profit of your bets will be taxable because you are carrying on of that trade i.e. spread-betting firm. This is what it implies here:
http://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim22019
In my view it is important to contrast the meaning of running a spread betting firm as opposed to the meaning of carrying on a business which happens to involve spread betting. The former is narrowly focussed on the activities of spread betting whereas in the latter, the net is much wider in terms of what may constitute as the carrying on of a business. Generally in taxation terms, the carrying on of a business may include the following :
1)the nature of the activities, particularly whether they are intended to be profit making;
2)the intention to carry on a business;
3)the degree of repetition and regularity of the activities, including whether the activities are carried on in a business-like manner; and
4)the size and scale of the operations
Broadly, if a firm is established and maintained to make a profit for its owner and its assets are invested in activities intended to make a profit, it is likely that it will be carrying on a business in a general sense. The meaning of "firm" may include a sole individual that is carrying on a business.
BIM22019 and the associated case laws mentioned clearly illustrate some of the above points such as :
In Down v Compston [1937] 21TC60 a professional golfer attached to a golf club habitually engaged in private games of golf for bets of varying amounts and won substantial amounts. He was found not to be liable to tax on professional income on the basis that the bets did not arise from the playing services and
that there was no organisation to support the view that he was carrying on the business of betting on the games of golf.
In Burdge v Pyne [1968] 45TC320 the proprietor of a registered club which provided gambling facilities, including a card room, won considerable sums of money from three-card brag which he played regularly with members in the card room. He was taxable on his gambling winnings.
Pennycuick J stated at pages 323 and 324:
‘…
the Appellant was carrying on the business of a club; upon the club’s premises he habitually played the game of three-card brag with other members of the club; and at that game he was invariably successful… Given those facts, it seems to me that the Commissioners came to the right conclusion in finding that the winnings of the Appellant from three-card brag did represent
a receipt by him in carrying on the business of the club.
Spread betting is deemed a betting activity and is not subject to tax because it is considered revenue negative to go after spread betters.
https://www.forbes.com/sites/timwor...-it-wouldnt-produce-any-revenue/#1b4e0b87a2f2
In my view it is a farce because spread betting say UK shares would be no different than actually trading UK shares but there is no exemption from tax on the latter.
It is my view that the angle on which the tax authorities may decide to go after profitable players would be on the basis that they are carrying on a business and spread betting is simply incidental to the case. Therefore the facts matter in that whether your profits from spread betting is derived from an organised structure that fits the meaning of carrying on a business.
