Tax

[Parky]

Many traders who trade for a living have been given the impression that they can trade, with a spread betting overlay and pay no tax.
Not according to HMRC, it is shades of grey but indications are the tax man is looking at this issue and a few doors will be knocked on.
My understanding is that spread betting is only tax free if the spread betting is not the main or only source of income and/or this is not “organised” betting.
If a company that has created the IT infrastructure to manufacture spread bets on the back of traders normal trading activities, it could very well be viewed as organised. Either way most of these companies side step any risk in a disclaimer saying you should seek your own tax advice and seems completely inadequate.

Despite recent populous press articles to the contrary professional traders are not “gamblers”, in fact these professional day traders are the direct replacement of “Local Traders” as they used to be on the floors of the old open outcry markets. Because they are providing liquidity to the derivatives and currency markets they consistently make a living from their trading. In this case they are not gambling and therefore are unlikely to be treated as such for tax purposes.
I would have thought given the current economic situation and the bad press with regards to the City of London and the Financial services sector that anything that could be viewed as tax evasion schemes would be quickly closed down.
In any case I would be interested in other peoples views.

 

[Shakone]

As far as I'm aware, there hasn't been anyone who makes trading profits (i.e. they're not profiteering from teaching etc) who has been forced to pay taxes on their spreadbet gains. If there has been, and I could be wrong, please name that person. Until then, those earnings are tax free whether it's the main source of income or not.

Someone selling signals can be taxed. A poker player who is sponsored can be taxed, because they are receiving income that's not betting.

 

[Hotch]

Herp derp, if they tax you on winnings, you can claim tax back on your losses, HMRC isn't going to let that happen anytime soon.

 

[Ross Spur]

Much less trouble for HMRC to rake in tax from SB companies' profits than chase after the few punters who make any sort of living from it.

 

[Parky]

Then take a look at this:-
Are profits from spread betting always free of tax?

www.traderstaxclub.co.uk/public/89.cfm?sd=2

I would suggest anyone spread betting for a living gets some real independent tax advise. As I say I have spoken to them and they stated very clearly that nobody earning a living in this country can seriously expect to do so tax free.

Ross Spur, you are correct and I am sure they will go after the companies but all these companies have disclaimers that tell you all you really need to know bascially if they are wrong you pick up the bill not them.

 

[barjon]

Parky

This comes up time and time again. It's no use reading various articles, just go direct to the horse's mouth - HMRC. First of all there's this (the thumbnail) which covers the capital gains side. Then there is the judgement concerning professional gambling as sole source of income (which I can't lay my hands on at the moment).

Anyway, the upshot of it all is that there is no tax on spread betting as a sole activity. The grey area is when there is an associated and related activity - like coaching/training, selling trading tips etc - when the income derived from spread betting may be regarded as part and parcel of the whole business and taxed accordingly.

jon

 

[Parky]

I did phone HMRC, but I guess the problem is you can phone a dozen times, talk to a dozen different people and get a different answer every time.
The problem is that the "down side" to assuming your income is tax free and getting it wrong is going to be very costly especially as HMRC can go back several years.
However the person I spoke to you was very sure that nobody can expect to earn a living tax free, and that more than anything else makes perfect sense as far as HMRC are concerned. Also that Spread Betting is gambling as far as HMRC are concerned and that assumes casual betting not making a living out of it and that rules with concern to the main or sole income were covered under other tax rules.
In any case this is all about people making their own interpretation of the rules and if it was clear cut then the companies offering this service would be able to state unequivocally that this is tax free rather than hiding behind disclaimers.

 

[barjon]

I did phone HMRC, but I guess the problem is you can phone a dozen times, talk to a dozen different people and get a different answer every time.
The problem is that the "down side" to assuming your income is tax free and getting it wrong is going to be very costly especially as HMRC can go back several years.
However the person I spoke to you was very sure that nobody can expect to earn a living tax free, and that more than anything else makes perfect sense as far as HMRC are concerned. Also that Spread Betting is gambling as far as HMRC are concerned and that assumes casual betting not making a living out of it and that rules with concern to the main or sole income were covered under other tax rules.
In any case this is all about people making their own interpretation of the rules and if it was clear cut then the companies offering this service would be able to state unequivocally that this is tax free rather than hiding behind disclaimers.

parky

you've no need to worry as things are at the moment - except if you fall in the grey area i talked about - i'll have another go at unearthing the pro gambling judgement - it's on here somewhere as well.

jon

 

[scose-no-doubt]

Barjon, the CG part of that article means that they're talking capital gains tax there and not income tax.

Anyway, I've had both notes and technical articles dismissed when defendig a client's position in the past. There's all sorts to supersede and what not and they sometimes just claim discretion.

 

[Shakone]

This debate is up every few months I think. You can quote any article you like and have any worries you want about it, but it's all pointless until there is a precedent that someone spreadbetting (just spreadbetting, not receiving money for training etc as Barjon mentioned) pays tax. Is there a precedent of this? If you can't find a single person who does have to pay tax on that, then what does that tell you?

 

[scose-no-doubt]

You have to find someone who makes their sole income spread-betting first. What does that tell you?

 

[counter_violent]

I'm with Ross 100% on this. Much easier to tax the profits of the SB provider at source with the added benefit of a static target.

 

[scose-no-doubt]

What like VAT?

 

[barjon]

Barjon, the CG part of that article means that they're talking capital gains tax there and not income tax.

Anyway, I've had both notes and technical articles dismissed when defendig a client's position in the past. There's all sorts to supersede and what not and they sometimes just claim discretion.

scose

Yes, the thumbnail I posted was the capital gains tax note, the other on the income tax side - which I still can't find - was a high court judgement precedent. I take your point about dismissing notes - although the cgt legal position is well set - but high court judgement precedents can't be dismissed by HMRC unless it's put before the court again and a different judgement (and precedent) set.

Anyway, as someone said, first find your spreadbetter who is making enough to be bothered

jon

 

[scose-no-doubt]

Newcastle boss Mike Ashley loses £300million in bet on HBOS - mirror.co.uk

don't look here lol

 

[barjon]

Ah, half way there. Here's the note from the judgement, not the full judgement itself.

 

[scose-no-doubt]

Seems to me it's Spread Bet Plc lobbyists who've sorted this for the masses.

 

[Ross Spur]

It should be simple. HM Gov says income from gambling or competitions isn't taxable, which is why SB was invented about 40 years ago. If the rules are changed, SB would be finished and we'd all be trading futures and CFDs (and losing even more money, but offsetting it against other income).

 

[capitalspreads]

tax on spread betting

as yet the industry has yet to find a single reported instance of HMRC succesfully claiming tax against a winning spread betting client (but i believe they have tried a couple of times). Ringing up any government organisation and asking for an authorised statement is worthless as they are specifically told not to respond to queries such as these (as the conversation may be recorded and used in defence!)

the fact is that tax on capital gains is still the same today as it was back in the 1970's. It is all very well having capital gains tax but it is another matter trying to identify it and actually getting profitable traders to report their liabilities.

With spread betting and cfd companies the trades are all within one unit (i.e you cannot settle a Spread Bet trade taken with one provider by closing out with another, different, company). so it is much easier to just tax the SB company (both corporation tax and gaming duty). The revenue earns far more through this route than it ever will by try to tax individual client profits

Simon

 

[FUTEX]

Futex spend tens of thousands on legal and council opinions. Spreadbetting in nearly all circunstances wold not be taxable, but there are situations where other law takes precedence. Its about "professionalism". if gambling, is your profession, you are liable to tax.