uk tax laws on forex

[neil324]

'Pressure applied' really? By HMRC ?

You either owe tax or you dont.

Read this thread a few pages back. Someone was approached by HMRC and they settled where spread betting was their sole source of income.

So it seems in 'their' case they owed.

Edit to add.

I have only seen mentioned once where they have had to pay tax. Which is in this thread.

The thread started in the spread betting forum was by someone who approached HMRC themselves for a ruling on their position. They never reported back the final decision.

Lots of posts reporting conversations with inspectors at regional offices though. Where by the theme seems to be, you have to pay tax.

So it seems HMRC lean on certain people in the hope they pay, quietly I might add, which is important to HMRC as pointed out by BobbyBB.

 

[BobbyBB]

For how many years has the argument been going on re spreadbetters should watch it if they win big (and is their only source of income) because the taxman will get them.

a) The taxman has got no one over the years and there are a few very big earners using spread bets, and more importantly

b) For every very large winner of spread bets there are probably 100+ very large losers, and I'm talking millions here, and if you can afford to lose millions with spread bets you can afford to employ the best tax accountants and tax laywers to fight your case in the courts to have your losses offset against income.

So let's assume the taxman gets Mr Big Spread better and says 'you own me £1.7million and that's enforcable by law. The very next day the taxman is taken to court by Mr Big Loser spread bet to have his £2.7 million loss offset against income. The day after that he's taken to court again by antoher big loser and on and on it goes.

The taxman knows this, so what does he do? He does the sensible thing, he lets the very few big winners enjoy their taxfree winnings which a large part will filter through in the economy anyway and doesn't let the many big losers (or even small losers) offset against tax. The taxman also realises that spread betting is a very very small business in the scheme of things and it is a NET contributer to the economy via jobs/spedning/taxes of the people/companies involved.

Also, I don't know the figure but it's a lot of money that the Kyte Group paid some of the best tax laywers in the land to advise them on the tax situation of what they do, and that was several years back and guess what - the taxman hasn't come calling....

 

[SpreadBeta]

One thing to remember in all this discussion is that HMRC do actually tax spreadbetting (over and above CFDs for example) and obtain quite a resonable tax income from it already.

This is because all companies that are registered as offering Spread Betting products (so are acting as Bookmakers) have to pay 3% of their Gross profits in the form of Tax, CFD companies doe not have to pay this Gross Profits Tax as HMRC will instead directly tax the winning traders via CGT / Income Tax.

This Spread bet Gross Profts tax (GPT) is passed onto their "punters" in the form of wider spreads etc..., which is why the prices you can obtain via SB are not usually as good as can be obtained via CFDs etc.. This tax was introduced back in approx 2001 so HMRC could get their Tax from Gambling direct from the companies rather than having to go after the winning punters. HM Revenue & Customs

Simon from CapitalSpreads when discussing GPT (on another forum) said that approx 15% of punters win in the longer term and 85% loose (cant find the exact quote at the moment but that was the gist).

If we therefore took 100 punters at random, with 85 loosing say £100 = £8500 and 15 winning £100 = £1500 in any given tax year, then the Gross Profits for the Spreadbetting Company (before all costs, wages, other taxes etc are accounted for) would be £8500-£1500 = £7000

HMRC than take their 3% GPT which is 3% of £7000 = £210.

If HMRC instead went after winning punters then to get their £210 pounds income from the £1500 made by the winning SB's would require them to tax the winners at an average rate of £120/£1500 = 14%. This is on the assumption that all £1500 the winners made is above the CGT/Income tax thresholds (depending on what tax HRMC are looking for from these winning punters) and they could find / identify them all anyway. (and this also assumes they could do so without ever alowing losses to be recoveed from other loosing spreadbetters!!)

So as I understood it back in 2001 when they were looking at how to obtain a decent tax income from Spread Betting it was concluded that simply getting the 3% Tax directly from the SB companies Gross Profits was the far simpler way for HMRC to have its pound of flesh from the gambling punters (by in effect getting the SB companies to collect it for them), with least effort.

If HMRC also started going after winning SB punters in any significant way, then surely it would bring into questions why SB companies have to pay the 3% GPT directly to HMRC (as CFD companies dont) as this would then start to become a double taxation on winning punters / the SB industry ?

Or am I missing something ?

 

[neil324]

No your not missing anything.

Except they would like both income streams most likely. Hence why they go after individuals discreetly as appears to be happening.

Using the sole source of income reason as the winners ain't going to be flipping burgers in McDonald's on the side.

 

[barjon]

I suppose it's worth posting these up yet again.

Spreadbetting is not taxable at the moment, even if sole income. The only problem is if you do something else by way of trade - like selling trading tips or systems etc - when your spreadbetting may be considered as part of an overall business and your winnings a taxable part of that business.

 

[BobbyBB]

SBeta, good post. The taxman looks at the whole industry and plays around with his spread sheets, what if I tax this, what if I tax that etc. Taxing winners causes would probably cause the whole industry to collapse on itself and then the taxman would lose for sure.

And like I said, if a reader made several million over the course of 5 years how much of that would be put into the economy versus how much in the bank/ Any money entered into the economy is good as it creates money velocity which is why the rich are so important, like them or love them. It's also why tax evasion is actually not so bad - for example, if you pay a painter £1000 in cash, what's he going to do with that money, most will spend it on general living, therefore that's good for the economy in general and perhaps better than him giving £250 to the government and they then waste 30%-50% if it. The only reasons why governments make real villians out of tax evaders is because they don't get their share to waste....

 

[D70]

For how many years has the argument been going on re spreadbetters should watch it if they win big (and is their only source of income) because the taxman will get them.

a) The taxman has got no one over the years and there are a few very big earners using spread bets, and more importantly

b) For every very large winner of spread bets there are probably 100+ very large losers, and I'm talking millions here, and if you can afford to lose millions with spread bets you can afford to employ the best tax accountants and tax laywers to fight your case in the courts to have your losses offset against income.

So let's assume the taxman gets Mr Big Spread better and says 'you own me £1.7million and that's enforcable by law. The very next day the taxman is taken to court by Mr Big Loser spread bet to have his £2.7 million loss offset against income. The day after that he's taken to court again by antoher big loser and on and on it goes.

The taxman knows this, so what does he do? He does the sensible thing, he lets the very few big winners enjoy their taxfree winnings which a large part will filter through in the economy anyway and doesn't let the many big losers (or even small losers) offset against tax. The taxman also realises that spread betting is a very very small business in the scheme of things and it is a NET contributer to the economy via jobs/spedning/taxes of the people/companies involved.

Also, I don't know the figure but it's a lot of money that the Kyte Group paid some of the best tax laywers in the land to advise them on the tax situation of what they do, and that was several years back and guess what - the taxman hasn't come calling....

Sorry, but this is complete tosh. If you've paid any tax on your spread bet winnings. You've been had.

 

[BobbyBB]

Sorry, but this is complete tosh. If you've paid any tax on your spread bet winnings. You've been had.

Eh? What the hell are you talking about?

I don't even spread bet!

With those sorts of spreads and the non-ability to trade on the bid or offer they're a pretty dismal product (unless held for longer term trades).

 

[dich.fx]

Hi guys,
I would appreciate if u have answer for my question. I have an account with CMC. As a person who does not have a UK citizenship and does not live in the UK will I be liable to capital gain tax on cfd trading profits?
Tia,

 

[bootsyjam]

Hi guys,
I would appreciate if u have answer for my question. I have an account with CMC. As a person who does not have a UK citizenship and does not live in the UK will I be liable to capital gain tax on cfd trading profits?
Tia,

Impossible to answer that Tia-depends on which country you're in. Even if you tell us, we most likely won't have a clue as it's doubtful anyone here will be experts in tax law in your country. Hell there's enough arguments amongst British people r.e. UK tax law so pretty sure you'll need to do some research yourself and ring up your own tax people/get advice r.e. your specific laws in your country.

 

[dich.fx]

Impossible to answer that Tia-depends on which country you're in. Even if you tell us, we most likely won't have a clue as it's doubtful anyone here will be experts in tax law in your country. Hell there's enough arguments amongst British people r.e. UK tax law so pretty sure you'll need to do some research yourself and ring up your own tax people/get advice r.e. your specific laws in your country.

I am form Bulgaria, there is no CGT in my country but not sure if i have to pay when my account is with a UK broker.

 

[bootsyjam]

I am form Bulgaria, there is no CGT in my country but not sure if i have to pay when my account is with a UK broker.

Well then ring your tax office in Bulgaria/use an accountant/use Bulgarian sites and google and find out for yourself!

 

[stevespray]

You will not have to pay any tax in the UK. Tax is paid, in most cases, based on the place where you live and not where the account is held.

 

[random12345]

I am form Bulgaria, there is no CGT in my country but not sure if i have to pay when my account is with a UK broker.

You are not liable to UK CGT as a nonresident.

HM Revenue & Customs: Tax on UK income or capital gains for non-UK residents

You should probably make sure that Bulgaria don't consider you open to income tax on your earnings as you're 'trading' contracts rather than holding and selling underlying capital assets.

 

[dich.fx]

"Q2. I carry on a trade through a branch or agency in the UK, but I am not resident/not ordinarily resident, am I liable to capital gains tax when I dispose of assets held for the purpose of this trade?

A. Yes, you are liable to capital gains tax on these disposals."

How do u guys interpret this?


Tia

 

[random12345]

"Q2. I carry on a trade through a branch or agency in the UK, but I am not resident/not ordinarily resident, am I liable to capital gains tax when I dispose of assets held for the purpose of this trade?

A. Yes, you are liable to capital gains tax on these disposals."

How do u guys interpret this?


Tia

This means if you have a permanent establishment in the UK, such as an office space. It's tax treaty decision and wouldn't effect you.

Are you actually disposing of any assets anyway...? What you're trading has no value for the purpose of meeting liabilities so it's dubious whether what you have is an asset or not by using a UK CFD broker or spread better, especially if they are not market orders.

 

[dich.fx]

This means if you have a permanent establishment in the UK, such as an office space. It's tax treaty decision and wouldn't effect you.

Are you actually disposing of any assets anyway...? What you're trading has no value for the purpose of meeting liabilities so it's dubious whether what you have is an asset or not by using a UK CFD broker or spread better, especially if they are not market orders.

Thanks. The only reason i raised the subject is the answer i got from CMC:

"Dear Mr ,

You will be liable for for capital gains tax but we advise you contact a tax specialist regarding this issue, as we are unable to advise you on this subject.

Kind regards

New Accounts Team
-------------------------------


Subject:
RE: CMC markets
________________________________________



Last question. As a person who does not have a UK citizenship and does not live in the UK am I liable to capital gains tax?

Regards "

 

[random12345]

Thanks. The only reason i raised the subject is the answer i got from CMC:

"Dear Mr ,

You will be liable for for capital gains tax but we advise you contact a tax specialist regarding this issue, as we are unable to advise you on this subject.

Kind regards

New Accounts Team
-------------------------------


Subject:
RE: CMC markets
________________________________________



Last question. As a person who does not have a UK citizenship and does not live in the UK am I liable to capital gains tax?

Regards "

I feel I should charge you for this

http://www.hmrc.gov.uk/taxtreaties/in-force/bulgaria-uk.pdf

Article 12 (4) applies to you, immovable property refers to buildings etc so does not apply. It clearly states gains are taxable only in Bulgaria (where you are resident) and as already noted the UK would not seek to tax you domestically anyway because you have no PE and are not resident.