Captial Gains Tax rate on CFD trading when you have no income

Parky

Active member
240 28
We will have to agree to disagree, different accountants, like lawyers, will tend to interpret laws differently. But of course in this, if you call it wrong or get duff advice, you will end up with a very big bill. But should the tax man come knocking I am guessing their lawyers and accountants are likely to have deeper pockets than yours. If it sounds wrong it usually is, making a living tax free? Just be careful.
 

malaguti

Senior member
2,370 459
Can't disagree with you there buddy.
i used to be an accountant, have studied tax and corporate law, and consulted for HMRC
 

barjon

Legendary member
10,311 1,566
We will have to agree to disagree, different accountants, like lawyers, will tend to interpret laws differently. But of course in this, if you call it wrong or get duff advice, you will end up with a very big bill. But should the tax man come knocking I am guessing their lawyers and accountants are likely to have deeper pockets than yours. If it sounds wrong it usually is, making a living tax free? Just be careful.
malaguti is correct, parky.

we have covered this several times on here and I recall posting a photo shot of HMRC advice which said that professional gamblers were not “carrying on a trade“ even if it was their sole source of income. As malaguti says one may be regarded as carrying on a trade due to other activities, such as selling trading tips or systems, when spreadbetting profits may be considered as part of that trade income depending on individual circumstances.
 

malaguti

Senior member
2,370 459
Just to add, for Parky's benefit
the gambling tax return is only for those that offer:
  • betting or gaming, or both, from outside the UK to gamblers in the UK - for example, over the internet
  • betting from a UK shop
  • spread betting from the UK
It has to be your trade...not to be confused with what you or i might consider an individual trade (or bet)
 

tomorton

Legendary member
7,312 976
We will have to agree to disagree, different accountants, like lawyers, will tend to interpret laws differently. But of course in this, if you call it wrong or get duff advice, you will end up with a very big bill. But should the tax man come knocking I am guessing their lawyers and accountants are likely to have deeper pockets than yours. If it sounds wrong it usually is, making a living tax free? Just be careful.

In some respects I'd like to believe you are correct. But in such a case as this, where the administration is not absolutely clear, its always going to be possible to find tax advisors who take opposing positions.

What would amount to incontrovertible proof for me would be a decision by HMRC to tax a private retail spreadbetter. But as HMRC decisions are subject to appeal their decision would only be really final if subject to an appeal which upheld their decision.

So, Step 1 - do you know anyone who is a financial spreadbetter who has paid income tax on their gains?
 

malaguti

Senior member
2,370 459
I'm missing something, spreadbetting allows you to trade futures?? look at IG , you can trade futures via spread or CFD
That aside, its not the trading of futures which is what they are being taxed/not taxed on
prop traders receive a fee or commission for what they're doing. That's what they are taxed on. they are not being taxed on their gains or losses via futures or shares or other instruments
If they make a gain (not their own money) they have not technically made this gain, the prop firm has made this gain and in return they pay the prop trader. I'm not a prop trader, so im sure you can correct me if i'm wrong
they are therefore not being assessed under gains or losses, but rather assessed on standard fee income.

had they been using their own money they'd be classed as retail traders
 
  • Like
Reactions: tomorton

0FXTrader0

Active member
100 5
futures pricing on exchange is a lot tighter than via spread bet or cfd...i see your point that they are using firm capital and thus not retail traders. Only HFT are going to benefit from tighter spreads as most point and click traders are swing or day traders, in early 2000's there was alot more prop trading arcades but most have disappeared probably due to advantages of being a retail guy now
 

0FXTrader0

Active member
100 5
The new business model is online prop firms that charge a fee before giving capital. topstepfx, blufx, plus alot more. Not sure how credible these firms are and your left with a tax liability
 

new_trader

Legendary member
6,222 1,270
This from HMRC "Since gambling winnings are normally considered miscellaneous income for casual gamblers, they are not subject to self-employment tax. However, professional gamblers do incur self-employment tax on a gambler tax return. "
Can you provide a link to the HMRC site where you copied this from? I only find it quoted in US tax law advice.
 

Parky

Active member
240 28
It is buried in various Tax updates, your accountant should be able to find it, but the goal posts are moving all the time, see below. But the main point is if you are employed and spread bet for fun then you are OK, but if it is your main source of income you may not be depending on who you talk to.

HMRC internal manual
Business Income Manual
From:
HM Revenue & Customs
Published:
22 November 2013
Updated:
2 May 2019, see all updates
Meaning of trade: exceptions and alternatives: betting and gambling - spread betting

The principles of Down v Compston [1937] 21TC60 and Burdge v Pyne [1968] 45TC320 (see BIM22019) apply equally to spread betting. 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.
 

Parky

Active member
240 28
Well that always the issue, reading between the lines, I would say "making a living" from your trading would be the economic substance.
 

new_trader

Legendary member
6,222 1,270
Well that always the issue, reading between the lines, I would say "making a living" from your trading would be the economic substance.
That is incorrect though.

"Making a living" is not the criteria for paying tax on an income. If you make more than £1000/year from a hobby you will pay income tax on profits over £1000 even though you aren't making a living from your craft.

Ecomomic substance means whether you are purely making money from placing bets OR whether you are making money from taking bets i.e. Making commission and profits from punters that lose.

It's plain and simple: Meaning of trade: exceptions and alternatives: betting and gambling - introduction

The basic position is that betting and gambling, as such, do not constitute trading. Rowlatt J said in Graham v Green [1925] 9TC309:

‘There has been no decision of a court in Australia nor, so far as I am aware, in the United Kingdom where it has been held that a mere punter was carrying on a business.

However, an organised activity to make profits out of the gambling public will normally amount to trading

Meaning of trade: exceptions and alternatives: betting and gambling - the professional gambler


The fact that a taxpayer has a system by which they place their bets, or that they are sufficiently successful to earn a living by gambling does not make their activities a trade.
 
  • Like
Reactions: tomorton

NVP

Legendary member
36,737 1,871
I may have mentioned this before but talk to the hmrc......I have in the the past to ensure I dont ever get nasty shocks .....great stuff here but talk to the devil to,get clarity

N
 

Similar threads


AdBlock Detected

We get it, advertisements are annoying!

But it's thanks to our sponsors that access to Trade2Win remains free for all. By viewing our ads you help us pay our bills, so please support the site and disable your AdBlocker.

I've Disabled AdBlock