Are all my spread bet profits tax free?

[malaguti]

Its amazing how many "tax experts" we have on T2W

and forex experts ..."retail forex", my bad

 

[barjon]

What at District level and within last 10 years ???

If so - you are either covering or not mentioning their "black arts " ;-))

Regards


F

Much higher than district level but not within the last ten years.

Nothing much has changed though - the evil wizards are still out to dun everyone they can and pull every sort of trick to do them out out of their money. That's what you believe, of course, such a pity it's so far from the truth

 

[Forexmospherian]

Much higher than district level but not within the last ten years.

Nothing much has changed though - the evil wizards are still out to dun everyone they can and pull every sort of trick to do them out out of their money. That's what you believe, of course, such a pity it's so far from the truth

Actually - I am more on their side - so many people get away with not paying what they should be paying and I look upon accountants ( I trained as one ) and Lawyers as the parasites - but as an ex business man - I have seen all sides of the arguments - even the London car dealers who underpaid over £1 million of VAT and got away with just a settlement of under £50k.

I reckon all the good guys left and joined accountancy groups and its about time they got more "clever" wizards back in and paid them well to get in 50% more than whats currently being paid by less than 70% of the working population.

Probably that's now happening - as they have certainly up the ante - but unfortunately not their service standards ;-)

Regards


F

 

[barjon]

The ante has been upped on tax avoidance (previously treated as an ok , if morally dubious, way of reducing tax burden) which is now pursued and challenged much more vigorously. Nonetheless, HMRC are still bound by the law and if there is a loophole that people can legitimately exploit then the only recourse is to change the law to close that loophole. They can't (and don't) just say "Dammit, we didn't really mean that anyone could do that so we'll just ignore the law and grab the tax back".

 

[Anon1]

Help/advicce

Hi Forexmospherian,

Can you help me with the following so I understand what it is you are saying:

I have a friend who by all accounts claims the following: (although he is probably lying)

He has won in excess of around £30 to £80k per year for over 6 years spread betting without having any other form of employment or work including self employment. Would he be liable for tax?

He has also in recent years been self employed earning around £15k pa) and winning of a smaller amount of around £20k per year gambling on the markets. Would he be liable for tax here as well?

He says he has even contacted HMRC in the past and they don't want any of his winnings, just tax payable on his earnings only.

Many thanks or your reply.

 

[Forexmospherian]

Hi Forexmospherian,

Can you help me with the following so I understand what it is you are saying:

I have a friend who by all accounts claims the following: (although he is probably lying)

He has won in excess of around £30 to £80k per year for over 6 years spread betting without having any other form of employment or work including self employment. Would he be liable for tax?

He has also in recent years been self employed earning around £15k pa) and winning of a smaller amount of around £20k per year gambling on the markets. Would he be liable for tax here as well?

He says he has even contacted HMRC in the past and they don't want any of his winnings, just tax payable on his earnings only.

Many thanks or your reply.

Hi Anon

I can only help you from how I understand it and of course the advise I received was really only applicable to my own Tax situation in relation to spread betting and so maybe different for other traders etc.

I am no Tax expert myself - but had spent considerable monies ( over £1200 just over 5 yrs ago) dealing with my own case - which I will say was complex.

From what I understand as of today - your friend who has employment and already paying income tax has no worries or concerns about his present profit being taxed.

They are tax free whether £100 per annum of even £100k per annum - as long as his employment as no connection with his trading activities.

OK.

Now the past. When he was earning larger amount of monies per year - when he had no employment - then although he may have been advised by his broker of even local tax office his profits were tax free - If today the HMRC was to find out about this case - and had reason to delve back into his tax affairs - they may then want to challenge him on that particular period - even though today he is now paying income tax through his other employment.

I think it is unlikely they would find out or even what to look at the case - but if he fall foul with them in the next few years - they can go back up to I think 6 years into his tax arrears.

Its all then down to negotiation and how much money he wants to spend with solicitors etc to get him off any penalties or charges - ie its worth spending £2-3k to save £10k - but not worth spending £3k to get it reduced by only £2k.

It all helps if he has it in writing from his local tax office that his spreadbetting was tax free at that time - and also as long as he was not claiming benefits etc when he was not employed - but earning from spread betting etc.

If there is any "weakness" in his past case - then the might of the HMRC will want to take him to task. Threatening bankruptcy to get out of a larger tax bill will be of no concern to the HMRC - their job ie to get money into their coffers and although they are going to have more opportunities with people earning large amounts of money - they can still intimidate and take advantage of their unique position with anyone who they think might in some way owe the some "back or undeclared" tax.

80%+ of the time - they win - but that does mean 20% of the time they don't ;-)

That's how I see it from what I have gone through myself - but to reiterate - it might be different for other people etc

Regards


F

 

[Forexmospherian]

The ante has been upped on tax avoidance (previously treated as an ok , if morally dubious, way of reducing tax burden) which is now pursued and challenged much more vigorously. Nonetheless, HMRC are still bound by the law and if there is a loophole that people can legitimately exploit then the only recourse is to change the law to close that loophole. They can't (and don't) just say "Dammit, we didn't really mean that anyone could do that so we'll just ignore the law and grab the tax back".

Hi Barjon

Sorry missed this one last night

I agree the HMRC are still bound by the law - but they are in unique situation - you are guilty with them and their rules and regulations etc - until you can prove yourself innocent. Under normal laws - you the citizen are innocent of an offence until it is proved you are guilty by the courts etc - the other way around.

No way do the HMRC want to keep ending up in court fighting the case in the open - they want it sorted and negotiated way before then - and this again - gives them an "edge".

This is not my own opinion - this is my interpretation from my past and present advisers - who may not want to say some of this out in the open and be quoted
etc - but if they don't say it - I am sure i will find someone who will

Regards


F

 

[Anon1]

Hi Anon

I can only help you from how I understand it and of course the advise I received was really only applicable to my own Tax situation in relation to spread betting and so maybe different for other traders etc.

I am no Tax expert myself - but had spent considerable monies ( over £1200 just over 5 yrs ago) dealing with my own case - which I will say was complex.

From what I understand as of today - your friend who has employment and already paying income tax has no worries or concerns about his present profit being taxed.

They are tax free whether £100 per annum of even £100k per annum - as long as his employment as no connection with his trading activities.

OK.

Now the past. When he was earning larger amount of monies per year - when he had no employment - then although he may have been advised by his broker of even local tax office his profits were tax free - If today the HMRC was to find out about this case - and had reason to delve back into his tax affairs - they may then want to challenge him on that particular period - even though today he is now paying income tax through his other employment.

I think it is unlikely they would find out or even what to look at the case - but if he fall foul with them in the next few years - they can go back up to I think 6 years into his tax arrears.

Its all then down to negotiation and how much money he wants to spend with solicitors etc to get him off any penalties or charges - ie its worth spending £2-3k to save £10k - but not worth spending £3k to get it reduced by only £2k.

It all helps if he has it in writing from his local tax office that his spreadbetting was tax free at that time - and also as long as he was not claiming benefits etc when he was not employed - but earning from spread betting etc.

If there is any "weakness" in his past case - then the might of the HMRC will want to take him to task. Threatening bankruptcy to get out of a larger tax bill will be of no concern to the HMRC - their job ie to get money into their coffers and although they are going to have more opportunities with people earning large amounts of money - they can still intimidate and take advantage of their unique position with anyone who they think might in some way owe the some "back or undeclared" tax.

80%+ of the time - they win - but that does mean 20% of the time they don't ;-)

That's how I see it from what I have gone through myself - but to reiterate - it might be different for other people etc

Regards


F

Hi again,

Thanks for clearing that up with your own experience. I have since spoken with the gambler about this period (making between £30k and £80k per year for over 6 years without paying any other form of tax. He said it may be down to terminology but he used words as such as these:

Trading: no, it is 'gambling'
Profits: no, it is 'winnings'


However, interesting that you say he could now be liable for taxes if they investigated. If this be the case then surely he would be able to write down any future or current losses and 'claim back' - 'overpaid' taxes'. Plus it was during this time he claimed he had spoken with HMRC directly. If that be the case, from what he states is that his 'winnings' are not 'profits' and therefore not taxable under current UK legislation. As with any gambling within the UK under current legislation (and previous). Previous gambling winnings cannot be taxable should the law state so from this point on for example. Ie, they cannot back date as the law at the time (as is now) dictates that gambling winnings (and losses) are not taxable nor for HMRC nor to declare as losses to offset taxes current or future.

I suppose if this was the case of having to have taxable earnings to offset paying taxes against gambling profits then all the person would need to do would be to get a job paying in excess of the current taxable rate !!. If what you say is the truth. Maybe I am getting the information from HMRC confused with you (with respect) Joe public that state taxes are due on 'winnings', in the UK under current legislation of course.

Regards,

Smeagain.

 

[Forexmospherian]

Hi Anon

Also - people who contact the local tax office and ask for clarification - will of course be recorded and logged.

Its a bit like what NVP said - ie - dont ask an hairdresser if you need an haircut

For advice to be given out they will need to take your details. If you ask for clarification of something you are not already doing - and basically the answer comes back spread betting "winnings" are tax free - under these circumstances etc etc - the person will only want to hear what the good parts and not any downside. Therefore if he states you I have a job and pay income tax and NI etc etc - and then claims I was told its tax free by the Local tax office on this date etc - a record of the conversation can always then be looked at in the future.

If circumstances change and besides spread betting he gives out trade calls in return for monthly payments - or gets a rebate from his broker introducing new clients etc etc - all this will effect his ability to say all his winnings are still tax free. Its a minefield - or as I like to call these situations - the real devil is always in the detail and the small print.

Finally - Why would your friend want to give up earning more tax free then take a job and pay tax - and earn less ?

Regards

F

 

[itspossible]

I have since spoken with the gambler about this period (making between £30k and £80k per year for over 6 years.
Ive just glanced out of my window and seen the moon.Its made of cream cheese you know

 

[Anon1]

Hi Anon

Also - people who contact the local tax office and ask for clarification - will of course be recorded and logged.

Its a bit like what NVP said - ie - dont ask an hairdresser if you need an haircut

For advice to be given out they will need to take your details. If you ask for clarification of something you are not already doing - and basically the answer comes back spread betting "winnings" are tax free - under these circumstances etc etc - the person will only want to hear what the good parts and not any downside. Therefore if he states you I have a job and pay income tax and NI etc etc - and then claims I was told its tax free by the Local tax office on this date etc - a record of the conversation can always then be looked at in the future.

If circumstances change and besides spread betting he gives out trade calls in return for monthly payments - or gets a rebate from his broker introducing new clients etc etc - all this will effect his ability to say all his winnings are still tax free. Its a minefield - or as I like to call these situations - the real devil is always in the detail and the small print.

Finally - Why would your friend want to give up earning more tax free then take a job and pay tax - and earn less ?

Regards

F

Hi Forexmospherian,

Thanks for clarifying. It sounds like the person I was speaking with and you are on the same wave length and maybe you have been misunderstood here.

So, in short, as long as a person is gambling on the financial markets for themselves only, ie, not buying the financial instrument but instead simply 'betting' on it then all 'winnings' and 'losses' would be non declarable against any tax (for or against). This excludes any other 'income' related to calls or anything else market related (or related to the gambling itself) that would/could be related to the gambling 'profits'. Not such a minefield maybe but clarity in such as are you the following:

A gambler for your own winnings only
OR
Anything else other than the above. (related)

I suppose for the majority of people on here and any other forum is the following question:

Are (all) my spread betting 'profits' tax free?

The answer then has to be - yes - providing you are not using your gambling in a way that constitutes a business/profession, ie, giving calls (for benefits/cash), selling related books or anything else related that would usually associate one with being a vendor.

(just to keep it simple than simple can be.....simples)

PS: as for the friend wanting to take a 'pay cut'. He says he has put his 'winnings' in to a business that provides a stable monthly income now and in the future for him and his family and that the business is doing very well and growing year on year. He states has turned over in excess of £500k to date and is currently sat in his new office reflecting and drinking a bottle of fine wine. Its also something else he has always dreamt of doing rather than just playing the meerkats. Probably a load of rubbish though. You know what the internet can be like. No one is transparent on here.

 

[SpreadBeta]

F, given what your experience has been re:having to pay tax on SB profits.....a few thoughts...

If HMRC wanted to they could surely easily obtain an electronic download (I would imagine they already are as don't all financial institutions have to pass records of all clients and their balances etc, to HMRC each year?) of SB clients and their profit by tax year for say the last 5 years. Matching this against PAYE and or SA tax returns would quickly identify any "target" punters they could go after for tax

I can only guess the reason they don't do this is either:
1) they don't believe it's worth the effort (as they wouldn't find that many SB clients with enough potential tax take to cover the cost of this effort)
2) they don't want to be seen to be going on a fishing expedition into the 10-15% of SB clients that are profitable in the longer term.

I guess if they went after profitable SB clients as a matter of course then it would put at risk their 3% betting duty they take directly from the SB companies profits based on the sum of their clients losses, a tax they don't get from CFD providers)

For example as I understand it ....If you take 8 SB clients and 7 each loose £10000 over the first quarter of 2015 and the 8th makes £20000 during the same period, then the SB company would automatically pay HMRC 3% of (7*10000 - 20000) = 3% of 50000 = £1500, no effort by HMRC is required, and most of the SB clients would in this example by taxpayers via PAYE anyway.

If HMRC actively and as a matter of course went after those SB clients not already paying income tax then they may risk this easily collected 3% betting levy that was put in place so SB clients already pay a form of tax (via SB charges etc) even if they didn't know they are.

Anyway, just thought I add these few musings on the topic....

 

[Forexmospherian]

Maybe this may give traders some clarity - ( its a complex matter and really cannot be looked as a "simple" in the eyes of the HMRC

This article has been taken from the Times newspaper - I have not got the authors name or date of publication atm - but need that as further confirmation -


Trading and Taxes: is Spread Betting really Tax Free?

Are you sure your spread bets are tax free?

The general assumption is that financial spread betting is tax free here in the UK (at least under the current tax laws). However, this isn’t always 100% the case. The crux of the issue seems to be the nature of your trades, as summarised here -

HMRC will try to tax betting if it forms part of another trade. To be taxable, the spread-betting wins must come not merely from an opportunity presented by a trade, they must arise from the carrying on of that trade. This could happen if, for example, you were a professional stockbroker or share trader, in which case your spread-betting profits would probably be taxable.
Effectively, if spread betting is your main source of income, then this is considered trading and you will be taxed on these profits. Most spread betters should be fine, but it’s worth keeping this in mind if you’re considering moving into spread betting full time.
Is financial spread betting (be it derivatives, forex trading, whatever) gambling (hence not subject to tax), trading (hence subject to income tax) or investing (hence subject to CGT)?
Spread betting is essentially day trading with one important difference that no assets exchange hands – still if you get a market direction right you make money!
From BIM22015 “The taxpayer placing a spread bet is not normally carrying on a trade (see BIM22020 for exceptions). They are not taxable on the profits, nor do they receive relief for their losses.”
From BIM22020 “To be taxable, the spread betting wins must come not merely from an opportunity presented by a trade, they must arise from the carrying on of that trade. Whether or not a particular spread bet is taxable will depend on the terms of the contract and the economic substance of what is done.”
My interpretation of this is that if you do something else for a living, which makes you realise a bit of cash could be made from a certain spread bet, it’s not a trade. But if what you are doing day in day out is spread betting, then it is a trade…
In the past I thought HMRC considered it gambling whatsoever the amount of the gains but now I’m not so sure particularly if it is your main source of income. Naturally for a typical hobby spreadbetter, this is not much different than betting on sports – you win some, you lose some so HMRC didn’t like the idea of people being able to offset their gambling losses against earned income. But for the lucky few who consistently make profits, the situation is more complex and for those without a second income I think HMRC might argue that it was no longer gambling. This is only a problem for people who consistently make large amounts of money from doing it full time – particularly if you try to abuse the system by claiming the various tax benefits as they have no income (their “winnings” not being counted)?
Thus I believe that if you can show that you have a ‘real’ job or a difference source of income, they will mainly accept that. Or if you can convince HMRC that you do this only occassionally (ie I had a good three months winning run) and that you have now stopped, all these things put up obstacles.
So let’s say it is trading – particularly for very frequent transactions – certainly this isn’t investing from an outsider’s point of view.
To put it short, whilst the concept is sold as tax free I think it is dangerous to assume that it is a carte-blanche to do as much as you want and remain untouched.

 

[EnergyLegger]

Hi Forexmospherian,

Thanks for clarifying. It sounds like the person I was speaking with and you are on the same wave length and maybe you have been misunderstood here. ............................................................................

Do you think we were born yesterday. Nice try but you forgot the following giveaways:

* very very few posters use the hyphen - in their posts.
* you both appear to be be misspelling 'wavelength' as 'wave length'

I could go on but I wont.

 

[Forexmospherian]

Do you think we were born yesterday. Nice try but you forgot the following giveaways:

* very very few posters use the hyphen - in their posts.
* you both appear to be be misspelling 'wavelength' as 'wave length'

I could go on but I wont.

?

Are you saying Anon 1 is me ie Forexmospherian - or some other member who has posted on this forum?

I have not got a clue who Anon 1 is - but I can 100% confirm - it's not me - and if you dont believe me - maybe a moderator or T2W staff can confirm that

Please get them to check it out if you want - no problem

If you are saying it is another member who is already posting on this Forum - you may be correct - but - I certainly don't know who it is and when you find out - please let us all know

Regards


F

 

[MajorMagnuM]

and if its not him it cant be me
(snigger)

 

[Forexmospherian]

Re - Post number 93 in this thread and the article

Trading and Taxes: is Spread Betting really Tax Free?

Appeared in the Times I believe this year ( 2015)

The article was written by Paul Doran - from Paul Doran Employment Law Firm

Besides being a solicitor - he has a Masters with a distinction in Employment Law from De Montford University and runs 2 offices in NI and the UK.

Just awaiting more info from 2 Accountancy groups

Regards


F

 

[Forexmospherian]

More evidence of the change in attitude to Full time spread betting as your main source of income

The HMRC want to keep spreadbetting under the general catagory of gambling so its tax free and so losses cannot be claimed against winnings or off other forms of income.

However over the last few years - full time spread betters - who are not paying tax on other forms of income - or from other sources of employment are now trying to be classified separately - and wins then are looked upon as income - and not gambling - and so will subject to being taxed

The previous article from Paul Doran Law Firm - explained it more - but this is another article sourced and confirmed from several accountancy groups explaining it again

http://www.investoo.com/tax-implications-of-spread-betting-in-the-uk/

Please read all the article as it explains it well and also mentions that the HMRC will always be wanting to cut down loopholes and it obviously has ways to do this

When I receive more updated info - I will post here

Regards

F

 

[itspossible]

I dare bet my left bollock that not 1 person in england is paying any tax on their spreadbetting profits.

 

[Forexmospherian]

I dare bet my left bollock that not 1 person in england is paying any tax on their spreadbetting profits.

LOL - do you talk in a high pitched voice

5 -7 yrs ago - nobody was - last 2 years the HMRC have got their teeth into the fulltimers worth chasing.

"winnings" from spread betting are tax free - consistent "profits" from spreadbetting with the spread better not paying any other form of PAYE / income tax are treated no longer as gambling - and therefore - are not tax free.

There will always be loopholes - and then they will be sorted - until the next ones come along ;-)

Regards


F