Spreadbetting & location

[JTrader]

Hi

hypothetically...............

if i go and live outside the UK, trade on my UK spreadbetting account from my new location, build up a substantial amount of capital over a year or so, decide to stay permanently in my new location outside of the UK, where would i stand for withdrawing my profits and buying a house with my profits in my new country?

If i were to trade on my spreadbet account from the UK, under current tax laws i'd be able to withdraw my profits, tax free, and invest them how i wished to, in UK property, merchandise or whatever.....

However, if i was living abroad could i just withdraw my profits from the spreadbet account. Pay the profit into my UK bank account, and then withdraw the cash, or transfer it to an overseas bank account?

Who'd be to know how long the capital had been in my UK bank account before i transferred it to my overseas bank account?

Is it legal to trade a UK spreadbet account from overseas, if you have a UK address etc.?

Or, if it came to light that I had built up the capital from an overseas location (i.e. working abroad) would i be liable to pay tax? again, how would anyone find out where I was located when the capital had been built up?

Thanks a lot
jtrader.

 

[ns1000]

It depends i) where you are resident for tax purposes and ii) the laws of the country in which you are resident iii) How honest you are with the taxman

It's perfectly legal under UK law for a foreign resident to open or maintain a SB account. If you're not in the UK though, the tax advantage is pretty meaningless. Few other countries will treat profit from spread betting as tax free, so you should consider whether SB is worth it. Will you benefit more from switching to futures trading or CFDs - if you're not resident in the UK for tax purposes, you won't be liable to the UK taxman for CGT on your profits anyway.

Almost without exception your meant to declare profits (even if made overseas) as part of your income for tax purposes. If it is earnt overseas and not repatriated you may get away without paying tax on it. You're right that no-one will necessarily know the source of the funds, but if it's enough to buy a house, you may have to declare the origin under Money Laundering laws. Whether you want to lie on that is a different ballgame.

Best thing to do is speak to an accountant who knows the tax laws of the country you're resident in. They're all different - Australia has about 50% CGT, but spreadbetting may have the same privileges as in the UK. Ireland SB is tax free, CGT is hefty. Other countries have no CGT to worry about.

Basically I would look at whether SB would have any advantage where you're moving to; if it does, stick with it and declare it, otherwise shift to CFDs and futures offshore.

 

[JTrader]

Thanks NS

If the taxman in your new country of residence (which did or did not deduct tax from betting profits) did want to know a bit about where your money had come from to buy a house outright, and it came to light that the capital had been amassed on your spreadbetting account, hile you had been in that country and not in the UK, could you just explain that, it was your spreadbetting account, with your original funds in it, and a friend or family member had actually been trading on the account for you during that time period growing your profits, so you had not actually been "working" in the new country?

It does seem a bit of a grey area................

Cheers

JT.

 

[ns1000]

Thanks NS

If the taxman in your new country of residence (which did or did not deduct tax from betting profits) did want to know a bit about where your money had come from to buy a house outright, and it came to light that the capital had been amassed on your spreadbetting account, hile you had been in that country and not in the UK, could you just explain that, it was your spreadbetting account, with your original funds in it, and a friend or family member had actually been trading on the account for you during that time period growing your profits, so you had not actually been "working" in the new country?

It does seem a bit of a grey area................

Cheers

JT.

Hi,

If you're resident in the new country for tax purposes, whether working or not, you're probably liable for any profits made on your SB account that are remitted to the new country. No matter who actually traded (even if family etc) the profit is in your name so you would be liable. Tax is generally on global earnings remitted to your country of residence. They would of course have no knowledge of when you made the profits (you may have made them before you became resident in the new country), but it's a risk as to whether you would want them asking for supporting evidence. Chances are that unless it's a seriously impressive house, the taxman isn't going to worry too much. Money laundering checks are unlikely to be carried out by the tax authorities, but rather the regulatory body in the new country, or the police.

Short answer is that tax will almost certainly be due on any profits when they are remitted to your new country, whether from SB, CFDs or normal share trading. SB abroad won't have the same tax-free status unless you're dealing with a licenced bookmaker and you're moving to Australia or Ireland (i.e not the same one as in the UK) so you may as well trade real futures of cheaper CFDs. Profits aren't taxed at source on these. Will the taxman find out if you don't tell him? Probably not. If they investigate, you could be in trouble, but if it were my money, I'd risk it.

NS

 

[Splitlink]

Hi,

If you're resident in the new country for tax purposes, whether working or not, you're probably liable for any profits made on your SB account that are remitted to the new country. No matter who actually traded (even if family etc) the profit is in your name so you would be liable. Tax is generally on global earnings remitted to your country of residence. They would of course have no knowledge of when you made the profits (you may have made them before you became resident in the new country), but it's a risk as to whether you would want them asking for supporting evidence. Chances are that unless it's a seriously impressive house, the taxman isn't going to worry too much. Money laundering checks are unlikely to be carried out by the tax authorities, but rather the regulatory body in the new country, or the police.

Short answer is that tax will almost certainly be due on any profits when they are remitted to your new country, whether from SB, CFDs or normal share trading. SB abroad won't have the same tax-free status unless you're dealing with a licenced bookmaker and you're moving to Australia or Ireland (i.e not the same one as in the UK) so you may as well trade real futures of cheaper CFDs. Profits aren't taxed at source on these. Will the taxman find out if you don't tell him? Probably not. If they investigate, you could be in trouble, but if it were my money, I'd risk it.

NS

Banks are obliged to inform the tax authorities of sums of money coming into an account over a certain amount in most countries and residents' world income should be declared on the tax form. Not declaring this is taking a risk.

I'd like to point out a matter that is causing some interest here, in Spain. You may have read of the corruption that has been rife in Marbella since Gil was mayor. Most of this has been in kickbacks to the local government. Now that they have been thrown out and some are in prison it has been announced that over 900 buildings, built on green zones, are to be demolished. Mose of these buildings are houses and large blocks of flats.

I know that there are stacks of foreigners living down there and it seems to me that it is probable that quite a few of the flats were bought with black money. Where do the owners stand if they decide to take legal action? It is going to be very difficult for them.

Split

 

[JTrader]

Thanks chaps.

I suppose a lot of this comes down to the tax laws in your proposed new country of residence.

What about if you traded an account in a UK based relatives name, from your new country of residence, made a big pot of cash and then that person gave you the proceeds as a gift?

Again, this may come down to the tax laws concerning gifts in your new country. How woud this work if both parties lived in the UK? eg. your sister gives you a £100,000 gift from money that she made through betting? or you rich footballer brother gives you £200,000? do you have to declare such things to the inland revenue? it would seem unfair if you do - because one item has come from a tax-free source, while the fottballer would have already paid tax on his earnings.................

Thanks a lot
jtrader.

 

[BrainStorm]

Are you sure of this? I presume it is to do with anti money laundering measures. I always believed (rightly or wrongly) that in the UK for example this was not the case. I would have thought they where quite 'hard line'.

Banks are obliged to inform the tax authorities of sums of money coming into an account over a certain amount in most countries and residents' world income should be declared on the tax form. Not declaring this is taking a risk.

Split

 

[Visaria]

Thanks chaps.

I suppose a lot of this comes down to the tax laws in your proposed new country of residence.

What about if you traded an account in a UK based relatives name, from your new country of residence, made a big pot of cash and then that person gave you the proceeds as a gift?

Again, this may come down to the tax laws concerning gifts in your new country. How woud this work if both parties lived in the UK? eg. your sister gives you a £100,000 gift from money that she made through betting? or you rich footballer brother gives you £200,000? do you have to declare such things to the inland revenue? it would seem unfair if you do - because one item has come from a tax-free source, while the fottballer would have already paid tax on his earnings.................

Thanks a lot
jtrader.

Yes, gifts are tax free and do not need to be declared. That's what theperson on the Inland Revenue helpline itold me a few months ago.

 

[Visaria]

Are you sure of this? I presume it is to do with anti money laundering measures. I always believed (rightly or wrongly) that in the UK for example this was not the case. I would have thought they where quite 'hard line'.

Quote:
Originally Posted by Splitlink
Banks are obliged to inform the tax authorities of sums of money coming into an account over a certain amount in most countries and residents' world income should be declared on the tax form. Not declaring this is taking a risk.

Split

In the UK, the Bank of England is informed of any cash of the amount £10,000 and over that is being paid into a bank account. The person paying it in needs to declare where the money came from.

 

[JumpOff]

Am I correct in understanding that spreadbetting is unique to the UK? All of the spread bet companies that I am aware of are located in the UK. I haven't seen anything like this in the US.

Thanks,
JO

 

[Splitlink]

In the UK, the Bank of England is informed of any cash of the amount £10,000 and over that is being paid into a bank account. The person paying it in needs to declare where the money came from.

Thanks for the correction, Visaria.

Split

 

[Rainmaker]

Am I correct in understanding that spreadbetting is unique to the UK? All of the spread bet companies that I am aware of are located in the UK. I haven't seen anything like this in the US.

Thanks,
JO

i think the uk is one of the few countries wear betting is free of income tax AND where trading can be passed off as betting.

 

[Visaria]

Am I correct in understanding that spreadbetting is unique to the UK? All of the spread bet companies that I am aware of are located in the UK. I haven't seen anything like this in the US.

Thanks,
JO

I'm presuming that it's allowed in Australia since Finspreads have an office there. With regard to the US, spreadbetting on financials is illegal but I think allowed on sports (in some states).

 

[Rainmaker]

i think that cmc also operate in oz, suggesting that they have similar laws to the uk.

 

[Racer]

Yes, gifts are tax free and do not need to be declared. That's what theperson on the Inland Revenue helpline itold me a few months ago.

I thought gifts only up to a certain amount are free... a few £K and above have to be declared by both parties?

 

[Visaria]

I thought gifts only up to a certain amount are free... a few £K and above have to be declared by both parties?

I was going off the advice given by the Inland Revenue helpline person who I asked specifically about this since I was due a large gift (a good five figures) and wanted to clarify the tax position. I was told there was no need to declare this since no tax is payable on gifts.

However a tax liability could arise for the person (or more specifically the person's estate) making the gift if they die within seven years of making it since it would then form part of the deceased's estate and may be liable to inheritance tax.

 

[roguetrader]

do you have to declare such things to the inland revenue? it would seem unfair if you do

ROFL.....err I don't think the Inland Revenue concern themselves too much with "fair"

Yes, gifts are tax free and do not need to be declared. That's what theperson on the Inland Revenue helpline itold me a few months ago.

That, I know as a statement in isolation is incorrect, very little research into tax reporting will reveal that there are a whole slew of laws regarding "gifts" depending on who is making them and to whom. If this were the case nobody would ever pay inheritance tax, you'd simply gift your money away before you died. What you were told no doubt was true for the specific case put to them.

i think the uk is one of the few countries wear betting is free of income tax AND where trading can be passed off as betting.

This too is questionable to say the least, the inland revenues policy on gambling is designed for and pertains to the act of casual gambling. If you seek to derive a consistent source of income from gambling, spreadbetting, or any other activity that would normally be considered for tax purposes to be a casual activity, then the Inland Revenue reserves the right to assess the circumstances on a case by case basis.
Rough translation.....If you spreadbet for a living, have no other source of income , namely a normal taxable job. You will most likely be deemed as undertaking this activity for the express purposes of deriving an income, and if you are any good at it you will likely be taxed, just as professional gamblers are. Of course you may deem it fit not to declare this and take your chances.
My advice seek either the advice of a chartered accountant and or the advice of your local Inland Revenue office......in writing.
I Read a few months ago of a sob story from someone who had fallen foul of the Inland Revenue and was now under investigation, some 7 months in, all his accounts were still frozen whilst they conducted their enquiries. They will be in little rush to resolve the matter and do not see ignorance as a defence.

 

[Visaria]

If this were the case nobody would ever pay inheritance tax, you'd simply gift your money away before you died. What you were told no doubt was true for the specific case put to them.

As i mentioned in my earlier post, the estate is not liable for inheritance tax on gifts as long as seven years have passed between the gift and the death of the person making it. As a famous example, the Queen Mother's estate managed to avoid inheritance tax on a huge sum since she gave millions to her grand children and manage to cling on to life for at least seven more years after she made the gifts.

People can't just start gifting money away all their money in order to avoid inheritance tax. The reasons are simple: a) they're likely to need some money and b) they don't know when exactly they're going to die!

 

[Racer]

I was going off the advice given by the Inland Revenue helpline person who I asked specifically about this since I was due a large gift (a good five figures) and wanted to clarify the tax position. I was told there was no need to declare this since no tax is payable on gifts.

However a tax liability could arise for the person (or more specifically the person's estate) making the gift if they die within seven years of making it since it would then form part of the deceased's estate and may be liable to inheritance tax.

Did you only ask one helpline person and rely on that? I know I have had conflicting advice from different people at the tax office!

As i mentioned in my earlier post, the estate is not liable for inheritance tax on gifts as long as seven years have passed between the gift and the death of the person making it. As a famous example, the Queen Mother's estate managed to avoid inheritance tax on a huge sum since she gave millions to her grand children and manage to cling on to life for at least seven more years after she made the gifts.

People can't just start gifting money away all their money in order to avoid inheritance tax. The reasons are simple: a) they're likely to need some money and b) they don't know when exactly they're going to die!

The royal family don't pay taxes anyway do they? No matter what the rules are for anyone else?

 

[roguetrader]

As i mentioned in my earlier post, the estate is not liable for inheritance tax on gifts as long as seven years have passed between the gift and the death of the person making it.

Hi Visaria, yes sorry, I was in mid reply when you posted that, so I didn't see it until I had replied, the seven year rule is as I understand it, but unless the laws have changed in the last two years (quite possible) there are all sorts of provisos on who is giving to whom and how much is being given, whether it iscash or property or something else

As a famous example, the Queen Mother's estate managed to avoid inheritance tax on a huge sum since she gave millions to her grand children and manage to cling on to life for at least seven more years after she made the gifts.

Not a good example to use as the Royal family are notorious for not being treated the same as the general public, there are notable tax examples regarding the Royal estates that do not apply to the rank and file