Tax

[barjon]

this thread was made for information and seems to have turned into a b*tchfit session....

Sure does and it's amazing how people plough on with their own versions

At the moment the thing is pretty clear cut (see thumbnails):

1. Spreadbetting is considered to be "betting" (gambling) - CG56105 (first thumbnail)

2. Gambling winnings are not taxable - BIM 22017 (second thumbnail)

It should be noted that this judgement concerned a man whose sole means of livelihood came from betting.


For the time being HMRC live by those "rules" and although they might seek to move the goalposts (they'd have to change the definition of spreadbetting or get the BIM 22017 judgement overturned first) it's extremely unlikely that they would do so retrospectively. Mind you, I suppose anything is possible from our beloved tax gatherers

 

[scose-no-doubt]

It should be noted that this judgement concerned a man whose sole means of livelihood came from betting.
[/I]

Whoops. Skipped that bit.

 

[Parky]

Whilst I appreciate that people will want to lump things together for their own benefit from what I have been able to glean there are some very distinct differences being drawn.
Firstly, spread betting on sports etc are not in question, the focus is on spread betting on regulated markets. Casual betting is not in question however consistent high volume betting that can be viewed as "trading" rather than taking a view and walking away is.
The main focus is taking trades from market access providers, Trading Technologies, Currenex etc and then "manufacturing" that activity into a Spread bet for the sole purpose of avoiding tax.
It is all about how far you think you can push things before HMRC decides it has been taken too far and gets involved.
You also have to look at the context this Government being seen to be clamping down on tax avoiding local or individual traders in the City of London at this moment in time, without any risk of upsetting the big Banks and trading companies? I would have thought it was an absolute public relations gift far too good to miss.

 

[Hoggums]

Whilst I appreciate that people will want to lump things together for their own benefit from what I have been able to glean there are some very distinct differences being drawn.
Firstly, spread betting on sports etc are not in question, the focus is on spread betting on regulated markets. Casual betting is not in question however consistent high volume betting that can be viewed as "trading" rather than taking a view and walking away is.
The main focus is taking trades from market access providers, Trading Technologies, Currenex etc and then "manufacturing" that activity into a Spread bet for the sole purpose of avoiding tax.
It is all about how far you think you can push things before HMRC decides it has been taken too far and gets involved.
You also have to look at the context this Government being seen to be clamping down on tax avoiding local or individual traders in the City of London at this moment in time, without any risk of upsetting the big Banks and trading companies? I would have thought it was an absolute public relations gift far too good to miss.

Such a move would destroy spread betting firms - and for that reason I do not believe it will ever happen. Take a look on CNBC and you'll see an interview with the CEO of IG Index - he says that 50% of their revenue is made by 2% of punters. You start taxing these big players and you'll destroy all spread betting companies. I don't think HMRC want to do that given the huge betting tax take they get from these guys.

 

[scose-no-doubt]

BIM22017 is quite clear. Should have read it all before mouthing off really.

 

[barjon]

Whilst I appreciate that people will want to lump things together for their own benefit from what I have been able to glean there are some very distinct differences being drawn.
Firstly, spread betting on sports etc are not in question, the focus is on spread betting on regulated markets. Casual betting is not in question however consistent high volume betting that can be viewed as "trading" rather than taking a view and walking away is.
The main focus is taking trades from market access providers, Trading Technologies, Currenex etc and then "manufacturing" that activity into a Spread bet for the sole purpose of avoiding tax.
It is all about how far you think you can push things before HMRC decides it has been taken too far and gets involved.
You also have to look at the context this Government being seen to be clamping down on tax avoiding local or individual traders in the City of London at this moment in time, without any risk of upsetting the big Banks and trading companies? I would have thought it was an absolute public relations gift far too good to miss.

Blimey, parky. Did you read those HMRC thumbnails above.

The first relates specifically to financial spreadbetting and identifies it as gambling.

The second specifically relates to the the professional gambler not just horse race gambler.

To draw and maintain the distinction between trading and betting is the main reason why SB companies go to the expense of developing their own trading platforms and prices. ie: customers are betting against the bookmakers "odds" and not directly in the market.

It's true that some sail pretty close to the wind though and that might set HMRC rumbling. There's one that claims DMA with spread-bet tax free wrapper and I'd be chary of that lasting or that my winnings wouldn't be caught.

I take your point about the good PR even though it might prove a counter productive and expensive exercise as Hoggums says. Even then I would very much doubt that there would be anything retrospective about it.

jon

 

[capitalspreads]

as i said right at the start of the thread the tax rule is "sole source of income" not "main source of income"

the problem is HMRC's description of 'sole'.

Let me put it into perspective though. As many readers will know 80% of retail traders (Futures/FX/SB or CFDs.. DMA or MM whatever) lose money not only this the 80% who lose... lose far more than 4 times the 20% of winners.

The Inland revenue gets 3% of these net losses from the SB company (remember they would actually get a negative Capital Gains liability if this was taxable as Tax Payers would be able to offset SB trading losses against other liabilities). In reality losses are seven times greater than winnings so the inland revenue get 7*3% =21% against the 28% tax they would try to get from the winners (who would anyway have a CGT tax threshold to get over).

The inland revenue is not stupid. They would rather get a definate amount from the SB companies (plus corporation tax of course) than try to get a similar sum from individuals.

As previously mentioned CGT income for the state is the same today as it was in the 1970's (and this is with property and shares worth ten times, or more, than they were then). Obviously the effort to get CGT defeats even the tax man.

Simon

 

[barjon]

.............as i said right at the start of the thread the tax rule is "sole source of income" not "main source of income"..........

Simon

er, the judgement - BIM 22017 - is about a guy whose sole means of livelihood came from betting, unless you know of a later judgement.

Mind you, if anyone should know, you should but I'd appreciate a bit of HMRC chapter and verse if you think BIM 22017 is not the legal precedent anymore.

cheers

jon

 

[neil324]

Hmm not clear cut is it.

How much tax does HMRC make from spread betting firms and how much do they lose from traders.

If a test case happened can the decision be applied retrospectively.

I can see the government needing to bring in more tax revenue in the coming years.

It would be nice to have it clear cut, after all you pay a premium to trade through spread betters to avoid tax.

 

[scose-no-doubt]

No it really is clear cut. Unless you get some nut job who wants to make his name setting new precedent then it's not happening... outside of Parliamentary reform of course and that ain't EVER happening.

 

[deebee1]

even if it was to start being taxed, wouldnt a simple move for the platform to a "tax haven" sort that issue out....
since 99% is computer based....

 

[DT]

Imo, this is total rubbish, it has nothing to do with disclaimers. The reason
the HMRC haven't actively pursued SB tax is they know it would open the
flood gates as far as off setting SB losses, that would cost them a fortune
and that is why there is no landmark case.

Futures trading is already taxed, stopping futures trades which have been processed as 'spread bets' by the back office from being free of tax doesn't open the floodgates to anything rather it closes a tax dodge that has recently been taken advantage of.

 

[DT]

I think some people have missed the point in this thread - the OP isn't talking about retail traders/bucket shops. This has got nothing to do with Capital Spreads, CMC, IG etc...

The OP works for a prop firm, presumably he's looking into this as I'm guessing his firm doesn't currently clear futures trades in their back office as 'spread bets'. There is at least one rival firm to the OP's currently doing this for professional traders. It is therefore prudent for other firms with a similar business model to look into the legal/tax implications.

I'm no tax lawyer but I can't see it lasting too long - locals/liquidity providers getting a tax free income because their clearer has called their futures trade a 'bet' after it's been executed...

 

[Mata Nui]

I dont think there would be an issue with the typical SB co like CS, SLM, WS etc but i have wondered how clear cut the situation would be with someone like Pro-Spreads. Dont you have to sign something that says you class yourself as a profesional investor with them? Also you can only bet in the contract size of the underlying so no £1 per point bets. I think if you made a lot of cash spread betting with pro-spreads and HMRC came calling you could be in an expensive bit of trouble.

 

[DT]

Perhaps, though as far as I know pro spreads is aimed at retail punters too and isn't really a DMA platform - I believe they'll give you the same bid/offer as the underlying but your orders won't necessarily get placed in the underlying despite being given a ladder. Tis easy to verify anyway by comparing with another feed. From what I can tell, even if they did provide DMA, their costs are way above what the average local would be paying with a clearer.

Regardless this thread was started as the OP is looking at the implications of professional traders using 'spread bets' (or rather futures trades being deemed 'bets' by the clearing firm). It's not about retail traders taking directional punts because they believe their chart/indicators allow them to predict the future - that is just gambling and will generate as many losers as any other form of gambling.

 

[fiftyfifty]

Any update on this issue or investigation? Considering how aggressively HMRC are dealing with the likes of Barclays today and investigations of other currently legal tax loopholes.

 

[deebee1]

not really, but to be honest, i personally think we are safe for a while yet.....

 

[capitalspreads]

i think that the tax point has to be taken in context

LCG (Capital Spreads) has not been approached once in all eight years of our existence by the HMRC to divulge client earnings. To be honest no senior director of any of our competitors has ever mentioned it either. (most of us do meet occasionally over rgulatory issues). HMRC would be risking far more income (gaming duty, corporation tax, other taxes from staff payrolls etc) by putting a spoke in the wheel and chasing after one person than is worth the candle.

Far easier to get income from a corporate (especially a regulated one) than trying to get CGT from individuals.

 

[SpreadBeta]

Whilst looking round the HMRC website today, looking for any changes to the spreadbet tax information I saw the usual BIM22015 to BIM22020 pages, however I also noticed for the first time BIM56900 entitled (Measuring the profits (particular trades): financial instruments and shares: contracts for differences and spread betting), which google says was updated only days ago. (i don't know what it said previously though)

At the bottom of this HMRC page it states "The profits or losses from gambling or wagering contracts are outside the scope of tax" which was unusually direct language for HMRC.

Just thought it was interesting enough to add to this thread....

 

[neil324]

Whilst looking round the HMRC website today, looking for any changes to the spreadbet tax information I saw the usual BIM22015 to BIM22020 pages, however I also noticed for the first time BIM56900 entitled (Measuring the profits (particular trades): financial instruments and shares: contracts for differences and spread betting), which google says was updated only days ago. (i don't know what it said previously though)

At the bottom of this HMRC page it states "The profits or losses from gambling or wagering contracts are outside the scope of tax" which was unusually direct language for HMRC.

Just thought it was interesting enough to add to this thread....

Thanks for posting.

Interesting for sure.