Spread betting is free from all tax in the uk

[Vaco]

I have been studyingh various topics on the hmrc website in relation to the above statement and have come to the conclusion that under current uk law spreadbetting is tax free even if it your main/only source of income.

This is the article that confirms this for me http://www.hmrc.gov.uk/manuals/bimmanual/bim22017.htm

and the important bit

''The fact that a taxpayer has a system by which they place their bets, or that they are sufficiently successful to earn a living by gambling does not make their activities a trade.''

''There is no tax on a habit. I do not think "habitual'' or even "systematic'' fully describes what is essential in the phrase "`trade, adventure, profession or vocation''

''This shows that having expertise or being systematic (‘studying form’) is not enough to create a trade of being a ‘professional gambler’.''


Anyone interpret any of this differently to me pls post your thoughts.

 

[pboyles]

Do you or anyone you know actually make money spreadbetting?

 

[Vaco]

yes

 

[donaldduke]

it has always been pretty obvious to me that is tax free regardless, but the sole income/main source of income myth never seems to die.

 

[donaldduke]

I have been studyingh various topics on the hmrc website in relation to the above statement and have come to the conclusion that under current uk law spreadbetting is tax free even if it your main/only source of income.

This is the article that confirms this for me http://www.hmrc.gov.uk/manuals/bimmanual/bim22017.htm

and the important bit

''The fact that a taxpayer has a system by which they place their bets, or that they are sufficiently successful to earn a living by gambling does not make their activities a trade.''

''There is no tax on a habit. I do not think "habitual'' or even "systematic'' fully describes what is essential in the phrase "`trade, adventure, profession or vocation''

''This shows that having expertise or being systematic (‘studying form’) is not enough to create a trade of being a ‘professional gambler’.''


Anyone interpret any of this differently to me pls post your thoughts.

i once mentioned this to someone on elite trader.

he was saying his accountants, one of the big four accountancy firms gave him the advice that spread betting would not be tax free for him as he had been a financial trader for over 20 years.

i mentioned bim22017.htm to him and he said that refers to horse racing etc and so doesnt set a complete precedent for financial spread betting.

 

[SvenFoster]

As for making a profit spreadbetting, I'm sure a profitable trader at a reasonable timeframe and account size can make money. Since most Sb'ers have small accounts, to much leverage and short timeframes most will lose..

since most of SB'ers lose the tax man chooses to tax the SB provider via corporation tax etc since they will make loads of profit

When it comes to the tax man, my spidey sense tells me you should keep some aside incase they come after you. just a thought.

 

[Vaco]

thank you Donald,

The idea that living 'free from tax is too good to be true' will always keep it alive.

But of course tax is still paid indirectly as a betting levy paid for by the betting shop which (lets assume they hedge) is taken from the added spread.

If we accept that the statement is true then I would hope it would not be a too complicated formula to decide which route is less expensive for your particular style of trading.

The obvious example would be that a true scalper would still be better off with dma if doing heavy volume and benefiting from low commissions (even if he could scalp on a spreadbet platform)

the cost of the increased spread would be far greater then the tax burden on overall profit.

On the other hand a position/swing trader with far fewer trades would find that the cost of increased spread is far lower then a tax burden.

However there must be a point where the decision is not so simple and the lines become blurred.

My maths is not good enough to create an equation/formula that gives you a rough guide as to which way to go.

It would be interesting if those that know how could post something up.

 

[oiltanker]

..he was saying his accountants, one of the big four accountancy firms gave him the advice that spread betting would not be tax free for him as he had been a financial trader for over 20 years...

when i first started i spoke to the head of department at uk tax head office on the phone. he said there is no tax on sb. you can't even claim to be self employed so no self assessment on it [there will be on other income other than savings]. i asked for this in writing which he sent. they send the horse racing gumpf because as far as they are concerned sb on financials is in the same class as horse racing. there are no experience qualifiers.

if you start to write books/give lectures on sb etc that generates income then that is taxable like anything else.

 

[Vaco]

i once mentioned this to someone on elite trader.

he was saying his accountants, one of the big four accountancy firms gave him the advice that spread betting would not be tax free for him as he had been a financial trader for over 20 years.

i mentioned bim22017.htm to him and he said that refers to horse racing etc and so doesnt set a complete precedent for financial spread betting.

Although the case related to horse racing reference is also made to card playing so i do not believe that the scope of the case is limited to one form of gambling or another.

I have also looked up articles relating to spread betting in particular and the legislation there appears to be more focused around preventing financial corporations from avoiding tax via spread betting.

Again if you start selling signals/mentoring/writing books then you are entering into a trade and risking having your spread bet profits been seen as part of that trade.

 

[shadowninja]

when i first started i spoke to the head of department at uk tax head office on the phone. he said there is no tax on sb. you can't even claim to be self employed so no self assessment on it

So future polls on SB success should be "how many of you are professionally unemployed?"

 

[donaldduke]

there is also the slippage around news or any other violent price spike to consider when comparing the tax situation against dma.

if the SB slips you 100 ticks but the the dma slippage was only 30 ticks that could be a huge difference, especially if that causes a profitable trade to be stopped out that would otherwise have not been.

the sb firms have habit of filling you at the high/low of the day after a price spike.

 

[oiltanker]

i have thought saying one was a gambler had all sorts of negative ideas in people's minds although that is what all business is. i take no different a risk than when i ran a retail firm for 7 years. you 'bet' on which lines you think will sell and you either make money or you don't.

so here are some alternatives to the word gambler. some of which are quite surprising

http://thesaurus.com/browse/gambler

so from that list these days i can say i am a risktaker, adventurer, philosopher, hero, swashbuckler

 

[Vaco]

there is also the slippage around news or any other violent price spike to consider when comparing the tax situation against dma.

if the SB slips you 100 ticks but the the dma slippage was only 30 ticks that could be a huge difference, especially if that causes a profitable trade to be stopped out that would otherwise have not been.

the sb firms have habit of filling you at the high/low of the day after a price spike.

Yes if your trying to trade the momentum after a news release sb just wont do and if your already in a trade then stop placement becomes an issue unless you just keep a mental one and decide on a course of action after price has settled. Again not ideal.

For the sake of making a formula we would have to assume no trading around major news releases.

 

[Jack o'Clubs]

While not disagreeing with any of the above, it's worth noting that HMRC have considerable discretion in interpreting some of the more flexibly worded tax rules, and quite often throw their weight around on the basis that all but the biggest fish will balk at employing specialist tax lawyers to fight back. I've seen this first hand in other areas of tax. Having said that, interesting that I've not yet seen a thread on this where anyone has personal experience of HMRC trying to pick a fight over spreadbetting which suggests it's a long way under their radar currently.

 

[donaldduke]

While not disagreeing with any of the above, it's worth noting that HMRC have considerable discretion in interpreting some of the more flexibly worded tax rules, and quite often throw their weight around on the basis that all but the biggest fish will balk at employing specialist tax lawyers to fight back. I've seen this first hand in other areas of tax. Having said that, interesting that I've not yet seen a thread on this where anyone has personal experience of HMRC trying to pick a fight over spreadbetting which suggests it's a long way under their radar currently.

its not for HMRC to decide, the tax tribunal/commissioners will decide and they are independent of HMRC.

My dads old accountant used to be a tax commissioner and he would arbitrate cases between the tax man and tax payers.

ofcourse HMRC can appeal to the high court if they lose at the tribunal.. but it is very unlikely they will do that.

 

[Jack o'Clubs]

its not for HMRC to decide, the tax tribunal/commisoners will decide and they are independant of HMRC.

My dads ex accountant used to be a tax commissioner and would arbitrate cases between the tax man and tax payers.

ofcourse HMRC can appeal to the high court if they lose at the tribunal.. but it is very unlikely they will do that.

Agreed - that was what I was saying: it takes some nerve, confidence and financial resources to employ counsel on your behalf for the tribunal/commissioners process. I'd imagine most 'little people' (ie the ones that pay taxes) buckle when they get a letter from the HMRC challenging them with the option to take it to the tribunal (as I said, i have some experience of it, and even when you strongly believe you are in the right it can lead to some squeaky-bum moments).

 

[donaldduke]

Agreed - that was what I was saying: it takes some nerve, confidence and financial resources to employ counsel on your behalf for the tribunal/commissioners process. I'd imagine most 'little people' (ie the ones that pay taxes) buckle when they get a letter from the HMRC challenging them with the option to take it to the tribunal (as I said, i have some experience of it, and even when you strongly believe you are in the right it can lead to some squeaky-bum moments).

if you are a little guy how would HMRC even know about you?
Spread betting profits do not need to declared on your self assessment.

If you are making big money spread betting and appear on the radar due to this, you can easily afford to hire counsel to represent you.

 

[marlintrdg]

With all these new Tax ruling and In-the-middle-of-the-night Tax changes one never knows.

{Edit: original part of post removed. Told this could be considered "tax advice"}
Who really know until one show's up in tax court, my solution is just to stay out of the UK and find somewhere else to go for the long summer months. A real shame as I'll miss England.

Luckily income tax is still illegal here, we know this is just a tax to keep the poor man in his place and want no part of it.

 

[Hoggums]

I think the fact that there is no case law regarding spread betting indicates that HMRc haven't aggressively pursued this avenue as yet.

The problem with a ruling in favour of SB'ing being taxable in sole/main income is that you will be able to start offsetting losses against other taxable forms of income. You would then also be able to offset the cost of spreadbetting (e.g. computer purchases, ADSL line rental etc) against your taxable income.

Even worse - it could also set a precedent for someone with large losses on SB offsetting them against their income tax from a job if they could demonstrate that SB income was their primary source prior to their losses. imagine being able to offset your losses by not paying any tax



Such a court ruling would be a dangerous for HMRC.

The fact is - HMRC knows that punters are a net loser so they tax the profitable side of the equation - the bookies.

Also - you can get a part time job - or just put a chunk of money into a high interest account and withdraw the earnings claiming this is your income source - both are subject to income tax leaving SB profits off the radar.

 

[N Rothschild]

the truth of the matter is your all idiot spreadbetting! the cost of the spread you pay will outweigh the tax bill from DMA trading by a long way.