Spread betting tax situation

[eminem]

I haven't done any extensive research on the subject but it would appear from the comments already made that it strikes me that there has never been a test case in the area of spread-betting - most of the gambling cases referred to are quite old. How long has SB'ing been around?? 30 years is it?, OK, so its only recently that it has grown to its current level of popularity but you would think that if this were going to be a rich vein of tax income for the IR they would have a test case under their belt by now wouldn't they? So the logical thought is that they must be doing OK under the current system of letting the profitable punters off scot free and taking their wedge from the SB firm.

It would appear to me that the IR do not want to upset the apple cart here, there is too much going against them I feel what with the EU equality rules confining them, a backlash from the SB firms if the IR do anything to upset them and affect their business, etc.

Also just as a side note, I think I remember from my distant past that if you have a genuine test case that is intended to create a precedent from, then as it is a matter of public interest you would not have to foot the legal bill for your representation - this certainly used to be the case many moons ago and things may be different now but it would be worth making enquiries on this matter.

Just my 2p's worth.

 

[MCGF]

Really?

Just trying to think of something i could do to be taken to court over just so i can get it paid for-how about a public monkey flogging?

 

[jcgb]

Ah, I was not aware that CFD trading is taxable. Can I offset my losses against income? (lucky I haven't filled in last years tax yet!) Or does it only apply if you 'trade for a living'.

 

[darrenf]

All profits from CFD's are taxable. I think either CGT if you are treated as a private investor or income tax if you are doing it as a business.

 

[PeterTT]

City Trader .. interesting one .. as its your first year I would not have thought it would be an issue. The IR do not tax someone who has a major win on the horses. Working in the City, I have another income as well, so for me it has not really been an issue yet. I think if I was in your situation, I would set aside 40pct of my winnings (assuming you can afford to) in a short term money fund / notice account. You are then protected if the IR really think they have a case against you (would be a very interesting/unusual case!). This also increases your non "trading" income for next year ! Such a case ruling against you would really turn the Spreadbetting industry upside down as the only benefit for alot of players is the tax free status .. hence they can charge a spread around futures prices.
Fortunately for me I have a working income and investment income as well as spreadbetting income so for me I would be able to argue that it is not my "profession".

Peter

 

[cashtrader]

TAX ON SB - YOU GOT IT ALL WRONG!!

I have made exhaustive enquiries. I asked some tax accountants, and they also asked their pals at the IR. My findings are if you make a sizeable income from only SB ( your main income) it is NOT and I repeat NOT subect to CGT or Income Tax. You don't need to declare it as such, unless you want to of course. I guess there some idiots out there who will!!!

There is nothing in the statute books to differentiate the claim from part time SB gains ot Full Time SB gains. SB is gambling like betting on Horses. What about the thousands of punters who make their sole living betting on horses on and off the course.

I know guys who make over £100,000 pa playing BlackJack! do you think for one minute they pay tax?

I am sorry but some of you guys have got your knickers in a twist on this one. So put your mind at rest, no tax is payable on SB ever until GB changes the rules and then it's back offshore. Either way we win.

Incidentally Free2deal now charge a 2 point spread on FTSE!


Cashtrader

 

[wysinawyg]

Re: TAX ON SB - YOU GOT IT ALL WRONG!!

I have made exhaustive enquiries. I asked some tax accountants, and they also asked their pals at the IR. My findings are if you make a sizeable income from only SB ( your main income) it is NOT and I repeat NOT subect to CGT or Income Tax. You don't need to declare it as such, unless you want to of course. I guess there some idiots out there who will!!!

There is nothing in the statute books to differentiate the claim from part time SB gains ot Full Time SB gains. SB is gambling like betting on Horses. What about the thousands of punters who make their sole living betting on horses on and off the course.

I know guys who make over £100,000 pa playing BlackJack! do you think for one minute they pay tax?

I am sorry but some of you guys have got your knickers in a twist on this one. So put your mind at rest, no tax is payable on SB ever until GB changes the rules and then it's back offshore. Either way we win.

Incidentally Free2deal now charge a 2 point spread on FTSE!


Cashtrader

I've always said I'm happy to let it drop once those who say there isn't an issue explain why there is a section in the IR manual on the situations in which winnings from gambling are taxable and how spread betting is more like gambling then playing cards (which has been taxed in the past).

wysi

 

[Philip]

I have not read all your postings so I hope I am not contradicting anyone.

You are not subject to income tax or CGT on betting UNLESS you are conducting a trade. If you are trading regularly, i.e. most days of the week and/or it is your sole or main source of income then you can be subject to Schedule D Income Tax.

If you declare it then almost certainly the IR will say Ta Very Much and assess you. If you don't declare and they decide in the future that you should have declared it you can be subject to penalties.

Your decision!

Welcome to life in the UK Police State!!

 

[donaldduke]

The thing is you are not conducting a trade because its
against a bookmaker, if you are doing it against the public
then i can see how it could be called a trade.


We dont know of anyone who pays tax spread betting, however
does anyone know of anyone who bets full time on the horses at
the bookies and pays and then pays tax at the end of
year on the winnings?

A few years ago you used to be able to bet on horses and
pay tax up front or after you win, i cant see anyone paying
tax again after already paying it at the bookies. I know
they abolished betting tax so you dont do that anymore, but
nothing else changed, and i dont remember any rule changes
that said because you dont have to pay betting tax anymore
then you should pay income tax at year end?

 

[Philip]

No, A trade is a trade. Doesn't matter who it is with.

At the moment the IR (as far as I know) are not looking to tax day traders and they may not unless they think people are making large profits. However if the losses are greater than the profits, by the same principle, they would have to allow the losses. Oooppps. They lose then so perhaps that is why they are choosing to ignore the what is happening

 

[donaldduke]

Well the case law already given in this thread seems to state
that gambling against a bookmaker is not a trade, even if done
full time.

Remember that spread betting is gambling.. CFDs, direct access
are not.

The IR have accepted that spread betting is gambling, its
still gambling if you do one bet or a thousand bets, full
time or part time.

 

[Philip]

The rule is that any activity can be a trade but it suits the IR not to treat gambling as such and tax people generally because overall the betters lose more than the bookmakers, who pay tax on their profits.

On the one side, where there is a profit, the IR get their pound of flesh, on the other they do not allow the losses. Not a bad deal for them.

I think that if you sat in an office spread betting all day every day, using your money and that of others and employing others to carry out bets the IR would claim that your were conducting a business and carrying out a trade.

 

[donaldduke]

No the rule is the courts decide, not the IR, the IR would
never try to claim it because they know they will lose.

This is what the courts have said in the past, when the IR
has tried to get people for gambling full time:

Now we come to the other side, the man who bets with the bookmaker, and that is this case. These are mere bets. Each time he puts on his money, at whatever may be the starting price. I do not think he could be said to organise his effort in the same way as a bookmaker organises his. I do not think the subject matter from his point of view is susceptible of it. In effect all he is doing is just what a man does who is a skilful player at cards, who plays every day. He plays to- day and he plays to-morrow and he plays the next day and he is skilful on each of the three days, more skilful on the whole than the people with whom he plays, and he wins. But I do not think that you can find, in his case, any conception arising in which his individual operations can be said to be merged in the way that particular operations are merged in the conception of a trade. I think all you can say of that man ... is that he is addicted to betting. It is extremely difficult to express, but it seems to me that people would say he is addicted to betting, and could not say that his vocation is betting. The subject is involved in great difficulty of language, which I think represents great difficulty of thought. 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''."

 

[Philip]

It appears that we agree to disagree so it is probably best if I do not continue the argument.

I will, however, be pleased to agree with you if you can direct me to the section in the Taxes Acts that says gambling is not a trade. It is a practice of the IR for reasons explained, which can be changed at any time. Witness the taxing of prostitutes and living off immoral earnings.

 

[donaldduke]

Its probably not in the Taxes act but its part of case law.

For those who dont know what case law is:

If a rule of law cannot be found in written laws, lawyers will often
say that it is a rule to be found in "case law". In other words, the
rule is not in the statute books but can be found as a principle of
law established by a judge in some recorded case.


I just quoted some case law in my previous post.

 

[cashtrader]

when I contacted my accountant he spoke to his connections at the IR and to their knowledge they have never had any cause to question Spreadbetting for schedule D or GCT. He also mentioned the fact that if a person made it his full time income by bettingon on shares, or whatever could that person be made liable to tax using bookmakers like IG index etc, thier answer was NO under current legislation.

You can earn a million a year using spreadbetting and not pay a penny in tax - period! You can earn a million a year betting on roulette, blackjack, horses etc. What's the difference. You don't need to declare one penny off earnings of this nature. Gambling is gambling in the UK.

Most people can't make money spreadbetting. If it were taxable, the Revenue would have to pay out billions in people's losses!!
So if the odd person can make it big on a regular basis, then that person can have a drink on the IR! They ain't going to discriminate because it wouldn't stand up in a court of law. They may try, but they would fail.

 

[chump]

"NO under current legislation"..that really is all you need to know on this issue of tax re spreadbetting..with a judicial precedent in force it would need statutory law to overturn same....

 

[donaldduke]

I think its just that some people cant believe that spread
betting for a living is tax free, it sounds too good to be true!

And you know it is, only a small percentage of people who
give up their day jobs and try to do it for a living will ever
succeed.

Trading is hard enough as it is, if you rely on spread betting
to pay your bills and put food in your and your families mouths its
going to be even harder. Youll be up against an army of
psychological demons you never knew existed.

Thats probably why they dont bother to change the tax rules
they know only a tiny minority of people will be able to do it..

 

[cashtrader]

I agree wholeheartedly with 'Donandduke' Even Del Boy says it's right! And he should know!!

 

[wysinawyg]

I'm with Philip here who appears to know the case that I, and the Inland Revenue Tax Manual, are talking about. Based on what I know you're pretty much bullet proof as long as you only spread bet and don't trade any of the underlying separately. On the other hand if you spread bet shares and also trade shares, or if you SB futures as well as the underlying, then just because the revenue don't currently tax someone doesn't mean they can't in the future.

For those who say its just betting so exempt, please explain how spread betting is more a form of gambling than 3 card monty.

wysi