Tax & spreadbetting, for full-time, sole source of income traders

[stevespray]

Why do we have a legal requirement to declare on the tax return any interest we've received from an offshore account if that interest has already been taxed with a 15% retention tax? I've no problem to pay that tax but I can't tolerate a government that wants to get into my personal banking privacy.

I obviously dont make the tax laws so I can't really answer the question but I'd imagine that the government know that if they left such a loophole open then it would be massively abused. I understand your point but tax law does look at your 'privacy' in that way.

Interest from offshore accounts is still classed as unearned income?

Steve.

 

[TheBramble]

we all know that parliamentary democracy in the UK allows us to have representatives, not delegates at Westminster (i.e., we elect them, but we don't directly control their political actions), and for right or wrong, we have little day-to-day control in any case.

'democracy' as in the majority elect the government? Don't think so.

I fear we're going off topic, but I still maintain that we can't have a viable state without income tax!

You can have an extremely viable confederation based purely on purchase tax and wealth tax - depending on how draconian you wish to be.

 

[TheBramble]

Taxes hinder economies by stifling growth. Resources, in the form of tax money, being paid to an entity (the government) that doesn't actually produce anything, could have been used productively elsewhere rather than on the whim of a wasteful government.

Oh, I don't think the UK government wastes on a whim. It's a finely focused and magnificently directed series of concerted acts of deliberate pointlessness.

Arts Council spend £77,000 sending a team of artists to the North Pole to make a snowman.

Quangos cost over £22 BILLION per year.

Local government pension schemes in deficit to £27 BILLION. (Wonder where they'll find the difference?)

Ken Livingstone's office (bless!) costs £13.9 MILLION per year to run.

Nottinghamshire's tourism board spend £120,000 rebranding the county with a big 'N'.

source: The Bumper Book of Government Waste

The thing is, you can choose. Either move to a geographical location which has a system of government (or lack of one) and an infrastructure that suits. Or create your own through methods that bring you the equivalent.

As for the central theme and point of this thread, as Chump has alluded to - it makes little difference what the situation in the UK is at present in relation to profits earned as sole income from spread-betting. Completely irrelevant. The rules (whatever they are in reality and with whatever degree of discretion they may be interpreted and applied by the forces of darkness) could change at a moments notice if it was in the interests of that government to do so. Given the profile of spreadbetting punters income distribution though, I hardly think they're considering working up a sweat on that one just now.

 

[roguetrader]

The rules (whatever they are in reality and with whatever degree of discretion they may be interpreted and applied by the forces of darkness) could change at a moments notice if it was in the interests of that government to do so. Given the profile of spreadbetting punters income distribution though, I hardly think they're considering working up a sweat on that one just now.

I wouldn't be so sure on that one, I am certain spreadbetting will not be high on their list of priorities, but a need to be seen to be doing something to combat the rapid spread of online gambling would certainly leave the door open for a re-introduction of some form of gambling tax at the punter level,

 

[leon1234]

apologies for bringing up such an old thread (atleast its better than creating a whole new one but..)

apparently you can get taxed spread betting if you you trade full time and its your main source of income, however, what if its your main source of income but you are a swing trader and spend an hour every trading day ?. thats 5 hours a week spent on trading, shouldn't that be tax free ?

 

[Vasco da Banana]

apologies for bringing up such an old thread (atleast its better than creating a whole new one but..)

apparently you can get taxed spread betting if you you trade full time and its your main source of income, however, what if its your main source of income but you are a swing trader and spend an hour every trading day ?. thats 5 hours a week spent on trading, shouldn't that be tax free ?

Yes. It's all 'betting', so it's supposed to be untaxed.

 

[Lee Shepherd]

apologies for bringing up such an old thread (atleast its better than creating a whole new one but..)

apparently you can get taxed spread betting if you you trade full time and its your main source of income, however, what if its your main source of income but you are a swing trader and spend an hour every trading day ?. thats 5 hours a week spent on trading, shouldn't that be tax free ?

Hi Leon,

This subject has been done to death here and all over the web and you'll find a hell of lot of info on the subject, some will even be conflicting, however, you will not find one person that is consistently making money from spreadbetting AND paying tax - unlesss carried out as a profession to a related business. It is gambling, winnings from gambling are not taxable in the U.K unless carried out for and under professional activity (NOTE: Classing yourself as a professional trader does not count).

Spreadbetting is gambling and therefore not taxed under current U.K legislation.

The only time this can come in to dispute is if you use spreadbetting in a professional way to make gains/income. In simple terms this means you are typically a vendor selling signal services, books, education etc based on the actual spreadbets. Then you are using gambling in a professional way and therefore it becomes taxable as it is then classed as an income which would be linked to your other (related) business.

Hope that clears that up for you.

Obviously if you are in any doubt whatsoever you should consult a tax professional but to be honest, your first and main concern should be....Am I making money from spreadbetting. When you are winning consistently over a course of a year then with the winnings, consider paying for someone who will put you straight.

Have a great bank holiday weekend,

Lee

 

[guidfarr]

Basically the answer is here:

So is Spread Betting really tax-free?

 

[scottuk99]

If you trade full time and it is your only source of income, dont you think it is a little unethical to try to avoid paying any form of tax on your income, after all its taxes that pay for so much that we use daily in our lives from schools to hospitals, roads and trains etc etc.......

In the UK our taxes go towards paying off the national debt (a never ending black hole) The money our government uses to run the Country and pay for schools and hospitals etc is the capital lent from the private central banks (Bank Of England) at a debt, so our taxes never get used directly on what we think it does.

Unfortunately all the things you have named above have been privatized already for profit. The NHS/hospitals are being prepared to be sold off to US health care firms, which is why the A&Es are being shut without a logical reason. A big percentage of roads and infrastructure are sometimes not funded by local councils/government, they use something called section 18 works, which basically gets companies to do all the work in return for planning permission

The Inland Revenue is a private for profit company (and a bank) the UK is a Plc.

Never feel guilty from earning legal income that is tax exempt.

Printing money and selling at @ interest to Countries is the BEST scam ever invented.

This "if you SB full time then you owe us tax" is garbage. Either Spread betting is tax free or It's not,It's like being "a little bit pregnant".... HMRC cannot change the goalposts if your doing well SBing and want a slice.

You have proof with statements if there is any doubt of how you acquire your money to the police etc, to prove your doing nothing criminal.:cheesy:

 

[random12345]

In the UK our taxes go towards paying off the national debt (a never ending black hole) The money our government uses to run the Country and pay for schools and hospitals etc is the capital lent from the private central banks (Bank Of England) at a debt, so our taxes never get used directly on what we think it does.

Unfortunately all the things you have named above have been privatized already for profit. The NHS/hospitals are being prepared to be sold off to US health care firms, which is why the A&Es are being shut without a logical reason. A big percentage of roads and infrastructure are sometimes not funded by local councils/government, they use something called section 18 works, which basically gets companies to do all the work in return for planning permission

The Inland Revenue is a private for profit company (and a bank) the UK is a Plc.

Never feel guilty from earning legal income that is tax exempt.

Printing money and selling at @ interest to Countries is the BEST scam ever invented.

This "if you SB full time then you owe us tax" is garbage. Either Spread betting is tax free or It's not,It's like being "a little bit pregnant".... HMRC cannot change the goalposts if your doing well SBing and want a slice.

You have proof with statements if there is any doubt of how you acquire your money to the police etc, to prove your doing nothing criminal.:cheesy:

A well researched and helpful post.

Sorry I was, of course, being sarcastic. Taxes and their policy of enforcement are set by parliament and then court decisions on the intent of the law clarify confusion or disagreement. HMRC do not create laws, they collect taxes the exchequer believes it is owed.

I agreed to settle tax on my own spread betting income with the commissioners when I became a full time self employed trader, but for that year and subsequent years only. I had previously declared all SB income by White Space Note and was not required to settle on those amounts as I was employed outside of trading, though I had worked for Mitsubishi UFJ prior to that, when I was.

If spread betting income is your only income then you are carrying on a trade, distinct from simply being presented a casual opportunity to trade should you wish by way of an occasional spread bet, whether that casual spread is on horses, golf, financial derivatives or American Football. This is the basis of the argument that people with other careers can use SB'ing tax free. It is a fair position.

BIM22020 - Trade: Exceptions & alternatives: Betting and gambling - spread betting - the court never ruled directly on financial spread betting cases because so few such cases exist. There are so few of these winning individuals since they insist on paying such a huge variable spread and enjoy having large latency feeds and therefore there is little profit in pursuing them and practically none of them make enough to go to court to press the argument. Any tax lawyer who isn't employed by Dodgy [email protected] will explain that this language clearly applies to SB 'traders' also. If you are REALLY making a lot of money and are worried then you can get someone at Linklaters or PwC (depending on the type of advice...) to clarify this for you, rather than looking on a forum board.

The big four will always tax traders etc on spread betting income if they carry on a trade that is related to financial derivatives or high wealth individuals who only trade. Complexities arise when trading forms a smaller part of your portfolio, but may still produce significant income.

It is always free from CGT as no tax is levied in general language on capital gains. Income tax is levied in general language on non hobbyists pursuing a profit from activities.

Note that this is basically irrelevant to people on the boards and they need not worry. Sustained income from this is extremely unlikely to happen to you. I wouldn't even consider worrying about it until you had three successful years at least and even then... HMRC will not cripple you with discovery fines either due to the fact that ambiguity remains.

Good luck.

 

[donaldduke]

If spread betting income is your only income then you are carrying on a trade, distinct from simply being presented a casual opportunity to trade should you wish by way of an occasional spread bet, whether that casual spread is on horses, golf, financial derivatives or American Football. This is the basis of the argument that people with other careers can use SB'ing tax free. It is a fair position.

Why dont the HMRC manuals actually state this anywhere?

ie. If it is your only income then then you are carrying on trade and it gets taxed.
Not just with regard to spread betting but other types of gambling too. Perhaps they do and i missed it but there are pages and pages of HMRC manuals and they seem to state the opposite that gambling against a bookmaker even if done full time is not 'carrying on a trade'.

BIM22017 - Trade: Exceptions & alternatives: Betting and gambling - the professional gambler

Now if you have come up a sure fire way of making money spread betting (arbitrage etc), then i accept then you are no longer gambling. But otherwise if you are just guessing market direction, 'studying form', then you are gambling and not carrying on a trade, even if you make big money doing it full time.

If some one (your tax office, inspectors, or Pwc or anyone else) gave you the advice that your full time spread betting is subject to tax, then they must of based this on previous case law. You should ask them for the case names, even if they were related to other types of gambling.

The link you quoted, Down v Compston [1937] 21TC60 and Burdge v Pyne [1968], dont make a case for taxing full time spread betting as far as i can see.

You mention the commissioners, they would have quoted you previous case law in making their decision, so which cases did they use in making their decision you should pay tax on your full time spread betting.

It would be good to read some specific tax case law for a change, instead of always hearing 'my accountant said so', or the tax inspector said so, or the barrister working for Pwc said so.

 

[Lee Shepherd]

Some people talk absolute rubbish and speculate on something they have either foolishly done or not done at all.

I've been winning money (and plenty more than the tax threshold) since 2002/04. Prior to this I paid tax as I was dealing in actual contracts on the market. I have spoken with HMRC (many years ago), I am on here and extremely transparent so I can easily be found by them. In fact I am one of T2W most transparent people, even more so than vendors and that says a lot.

I have not paid a single penny in tax on my gambling winnings. Nor will I ever unless the LAWS change. HMRC do not make the law. The law states that HMRC cannot tax gambling proceeds, regardless of the amount.

Think for a moment.

What about people that win several hundred thousands within a short period of time - Do these people get taxed? What about when they lose it again plus more - do they get a tax rebate?

What about people that have running streaks at a bookies, then lose it plus more?

What about people who win the pools or bonds on a monthly/yearly basis.

What about prizes on T.V where they 'pay' out £5k a month for life, do these get taxed also.

No one, I repeat no one has ever paid tax on winnings unless it is part of a professional outfit related to a business or/and trade. See my post above.

But to be fair, I don't know why I bother. Most will never be in the position to have to worry as most fail anyway. Those that wish to argue and believe they have to pay tax, well.....Pay tax then. It doesn't bother me. What I would say is know your law, pay what you have to and not a penny more. If you wish to 'give' away your money to the government, at least give it to a good charity instead.

AGAIN - No tax is due on spreadbetting winnings - unless its part of or/and related to another business.


HMRC - This is an invitation to come after me if you wish. I post statements with my winnings on the net and of course you can even insist you see all my bank statements and see how many hundreds of thousands I have won over the years. I do not owe any tax on my winnings as per the U.K Tax laws.

All the best,

Lee

PS: I'm confident this will keep coming up time and time again so I won't bother with this stupid unnecessary argument, at least for another few years anyway.

 

[instant]

Lee Shepard is correct.

Unless someone voluntarily goes to HMRC and says 'hey guys ..look I have made this spread betting.. can you decide if i should pay tax' (we can guess what their answer will be!) there is no tax to be paid.

Apparently HMRC has never once approached the major SB companies asking for financial details on any clients. If they are not bothered to go to the source why should anyone declare winnings as taxable income. And I can tell you that some clients do win mind boggling amounts.

 

[Lee Shepherd]

Lee Shepard is correct.

Unless someone voluntarily goes to HMRC and says 'hey guys ..look I have made this spread betting.. can you decide if i should pay tax' (we can guess what their answer will be!) there is no tax to be paid.

Apparently HMRC has never once approached the major SB companies asking for financial details on any clients. If they are not bothered to go to the source why should anyone declare winnings as taxable income. And I can tell you that some clients do win mind boggling amounts.

Hi Instant,

Unfortunately it is still not that simple/possible to do.

If you go into HMRC and say I wish to declare my winnings as taxable income they still have a legal duty to say no. This is for 2 main reasons:

1) Being that if/when you lose you may reclaim this money plus more if they accept
&
2) It would mean that as an income you would be able to obtain leverage against it. ie, a mortgage, loans etc as it would be 'an income'.

So, in a nutshell, even if you did go into HMRC and say 'Hey guys, please tax me on my gambling winnings' they would look at your form and say 'hey, you know what, you don't owe a penny, enjoy your luck whilst it lasts'.

Having said that, I don't know who would be mad enough to insist HMRC tax their winnings but I am sure it has been requested (and refused) for the purposes of obtaining credit.

Remember HMRC uphold the law, they don't create it. Just as much as you going into a police station and saying arrest me so I can go to jail. They will not do so until you have committed a crime.

Lee

 

[Parky]

Let’s be clear, what HMRC are driving at is "trading" is taxable, "betting" is not and one of the key things that they are looking for is Tax Evasion. So if you are trading on TT for example, a front end system that "trades" directly on the markets and this trade is taken by a company and a Spread bet is "manufactured" for the sole purpose of avoiding tax then you had better be ready for a knock on the door from HMRC.
If you are using a spread betting platform that is presented as a spread and has a back end that hedges your trade on the market, then it is a spread bet not a trade.
You can have whatever you want hanging on your wall but a spread bet from start to finish is a very different animal from a "trade" on the derivative markets that is then turned into a spread bet.

 

[BobbyBB]

There's not one established spread betting client that's paying tax I can guarantee that and it's all down to the spread.

Assume you made £1million last year trading spreads and assume the taxman taxed you at 40%, would you be trading spreads the next year with the costs of their spreads and the fact it's impossible to get filled on the bid (if buyer) or the offer (if selling). Or would you switch to the actual Exchanges or Cash markets where the spreads are smaller (take Gold as an example, $0.6 versus $0.10) and you always the the chance to get filled on the bid or offer?

Summary: If anyone has ever been forced by the taxman to pay tax on their spread bet winnings, and I'd put money on no, they're never going to trade spread bets again...

 

[Parky]

We are talking about professional futures traders and forex traders who have been convinced by salesmen that they can swap to spreadbetting without changing anything they are doing, including continuing to use their existing direct market access, but now do so tax free.
To quote Damian Green MP when he was discussing this business, "anyone who thinks they can earn a living Tax free in the UK is living with the faries"
professional traders have paid tax in the past and will do so again, as I said, it is one thing to use a dedicated spread betting platform it is another to trade on the markets directly via DMA platforms and then have these trades artificially dressed up as a spread bet for the sole purpose of not paying tax. Especially by companies that then deliberately distance themselves in the small print by saying all traders are responsible for their own tax affairs.