Difference between Spread betting and CFDs

new_trader

Legendary member
6,665 1,489
However, if HMRC considers that your full time occupation is trading, then regardless of what the spread betting companies say, you may be liable to receive a tax assessment. It will then be up to the individual to prove to HMRC that he/she does not have a tax liability. This is just the type of argument that has been raging between the Inland Revenue (as it was) and taxation specialists for years.

From what I gather it all depends on how you classify your trading activity….

If you are betting for entertainment then it is tax free (via spread betting account).
If you are investing (and holding trades over weeks) for growth then you are subject to CGT.
If you are trading (especially intr day) or speculating then you are subject to income tax.



You are quoting an article written on May 24, 2018 at 10:48 pm by 'David'.

David says in his bio: "A few years ago I discover a whole new world of opportunity: spread betting on the financial markets."

David, has been spread-betting for a few years.

You wrote: "The only idiots are you SB pikeys"

You are taking financial advice from an idiot SB pikey.
 

tomorton

Legendary member
8,422 1,346
However, if HMRC considers that your full time occupation is trading, then regardless of what the spread betting companies say, you may be liable to receive a tax assessment. It will then be up to the individual to prove to HMRC that he/she does not have a tax liability. This is just the type of argument that has been raging between the Inland Revenue (as it was) and taxation specialists for years.

From what I gather it all depends on how you classify your trading activity….

If you are betting for entertainment then it is tax free (via spread betting account).
If you are investing (and holding trades over weeks) for growth then you are subject to CGT.
If you are trading (especially intr day) or speculating then you are subject to income tax.


Not a single private retail spreadbetter in UK spreadbetting history has ever come forward and confirmed they have paid Income Tax on their SB gains.
 
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guest41766

0 0
You all been sniffing too much petrol. Thinking you can trade everyday on your SB portal making a living and not be at risk of income tax bill. The facts have been lay out and anyone can see what a grey area it is. The Sb companies even have *small print explaining this.
 

BigDeal

Active member
117 57
OFX I think it's time for you to come clean and declare the motivations behind your posts, because at the moment there is no progression and the conversation is going round in circles
 
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guest41766

0 0
Spread betting, index betting and binary options are not regulated by the UK Gambling Commission but instead fall under the umbrella of the Financial Conduct Authority (FCA). Despite this you do not need to pay the 18% UK Capital Gains Tax or stamp duty on winnings from Spread Betting. You also do not need to pay tax when betting on fixed odds currency and market fluctuations with bookmakers.

If however you call spread betting your primary source of income, or your day job, you may be liable to pay the tax, effectively you become classed as a trader in this scenario.

 

1nvest

Well-known member
320 111
Spread betting, index betting and binary options are not regulated by the UK Gambling Commission but instead fall under the umbrella of the Financial Conduct Authority (FCA). Despite this you do not need to pay the 18% UK Capital Gains Tax or stamp duty on winnings from Spread Betting. You also do not need to pay tax when betting on fixed odds currency and market fluctuations with bookmakers.

If however you call spread betting your primary source of income, or your day job, you may be liable to pay the tax, effectively you become classed as a trader in this scenario.

as soon as you open the link
1614960412237.png

thanks for summing it up so nicely..all you had to do, was look at this from the start
 
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tomorton

Legendary member
8,422 1,346
Spread betting, index betting and binary options are not regulated by the UK Gambling Commission but instead fall under the umbrella of the Financial Conduct Authority (FCA). Despite this you do not need to pay the 18% UK Capital Gains Tax or stamp duty on winnings from Spread Betting. You also do not need to pay tax when betting on fixed odds currency and market fluctuations with bookmakers.

If however you call spread betting your primary source of income, or your day job, you may be liable to pay the tax, effectively you become classed as a trader in this scenario.

Can you point to an actual situation in which a real person has been obliged to pay Income Tax on their SB gains?
 
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Guest36985

0 0
OFX I think it's time for you to come clean and declare the motivations behind your posts, because at the moment there is no progression and the conversation is going round in circles
He's an accountant and he makes money from people needing phoney accounting advice.
 
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Guest36985

0 0
Can you point to an actual situation in which a real person has been obliged to pay Income Tax on their SB gains?
Of course he cant he's just a fool with a big mouth (or typing fingers).
 

peto

Established member
971 113
Over the masses of spreadbetters it is less than a zero sum game. The wins of some are offset by the losses of others, and further losses occur from the bookies cut in the middle (the spread). It is a basic principle of taxation that losses may be offset against gains. And that's why we don't tax the winnings from spread betting in the uk. Because to do so would lead to revenue losses, not gains.
 

new_trader

Legendary member
6,665 1,489
We have reached a stalemate. I suppose it’s now up to the individual to try and figure out whether or not they should pay tax on SB profits.

My closing argument is this: The criteria for paying tax on spread betting profits that have been put forward by 0FXTrader0 are wrong. They can be summarised as, “If you are doing it full time” or “If it is your only source of income” then according to 0FXTrader0, you are liable to income tax, and to avoid tax, all you have to do is say “I’m doing it for fun”.

Nothing could be more ridiculous because the HMRC aren’t that stupid.

Tax on income producing activity is NOT determined by what you say (if only it was that simple). An example of this stated in the manual where “A single isolated transaction can amount to the carrying on of a trade for tax purposes”.

To determine whether your activity is classed as “carrying on of a trade” the HMRC has provided the ‘Badges of Trade’ in the business income manual. You can find the summary here: https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim20205

Read it and make up your own mind and if you are still unsure then ask the question in the community forum of HMRC website.
 
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guest41766

0 0
The SB firms even have the small print written on there websites *Tax laws are subject to change and depend on individual circumstances.

So individuals can be taxed on SB's that's why they avoid them and go to the futures or spot markets and setup limited company to limit there exposure.
 
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guest41766

0 0
I think that it is pretty clear that someone who pays tax on another income source will never have a problem if they make money via spread betting. The crux of the matter really relates to an individual who makes their sole income through spread betting.

Taxes and Spread Betting

From HMRC website:

‘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.’

The way I understand it is that there is no tax on spread betting winnings. That means no tax on gains, but also means you cannot offset your spreadbetting losses, unlike ‘normal’ share/bond trading or CFDs.

Of course, the Inland Revenue (HMRC) has the power to look at tax payers’ circumstances at an individual level if they are of the opinion that someone’s circumstances are unique or rare. In this respect I have little doubt that HMRC could deem a very successful spreadbetter as being ‘rare’ if it thought that it would help their case.

Having said that, I’m confident that the case of any possible Inland Revenue investigation against the ‘professional gambler’ would rest largely on the ethical principle; that persons conducting themselves in such a way by which they gain an income which they make a living on and should thereby be obliged to pay income tax on that money. This in practice means that some tax inspectors might provide advice which is 100% mechanical in nature where another may well introduce an element of ‘ethical principle’ (i.e. is it fair that someone might earn (win) £100k and not pay a penny in tax)?

Let’s assume that you earned £50, at the weekend, stacking shelves in Tesco but, traded 12 hours a day during the normal working week. Your profits, from trading, amounted to approximately £5,000 per week and you made 10 trades each day; what would HMRC consider to be your primary occupation and income source?

The shelf stacking in Tesco’s? Unlikely, I think…

“Try giving HMRC a call and see whether you ever get a clear-cut reply. I mean, you’re hardly likely to get a nice honest person at the IR saying all perky down the phone ‘yes sir that’s correct, go and make as much money as you can and you wont owe us a penny! Good luck sir!!!'”

Although I can understand both facets of the argument I’m not sure that the ethical standard could be used in a case which went as far as court. So long as the person in question could show that he / she was following the law then they wouldn’t have a case to answer. As far as I know there is nothing in law which states that someone must ‘pay’ income tax – instead the law requires that someone is ‘assessed’ for income tax – an assessment doesn’t mean that liability is always found.

You see there’s an absolute exemption from CGT and Stamp duty, but it is a potentially grey area where income is concerned. If spread betting profits constitute subsistence income, then it could be an issue. No clear cut answer. HMRC contains the same number of unambitious clock watchers as any other government department (that is when they are not on the sick) and most tax offices will be unable to give a sensible answer. You would probably need to be subject to an investigation before your status could be sensibly considered.

 

new_trader

Legendary member
6,665 1,489
The SB firms even have the small print written on there websites *Tax laws are subject to change and depend on individual circumstances.

So individuals can be taxed on SB's that's why they avoid them and go to the futures or spot markets and setup limited company to limit there exposure.

The 'individual circumstances' refers to where you are resident. I know this for a fact as I have looked into what would happen to my UK tax free investments if I were to move to another county. This is why they put in the disclaimer. If you are resident in the UK your ISA and NS&I investments are tax free. If you move to another country, say Australia, then your investments are Free of UK tax, but you may be liable to tax in the juristiction of your current residence.

for the tl;dr: this is a quote directly from https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim20210
(Highlights are mine.)

‘Where the question is whether an individual engaged in speculative dealings in securities is carrying on a trade, the prima facie presumption would be that he is not.

This is a quote directly from HMRC website not a blogger named 'David' on a commercial website.

So, IMO the question to ask in the HMRC community website should be along the lines of:

Is a CUSTOMER of spread-betting firm carrying on a trade?

Is a CUSTOMER of a spread-betting firm liable to income tax?

The bone of contention is whether or not a full time trader making a profit from speculative activity is carrying on a trade. To be continually asking if spread-betting profits are tax free is getting us nowhere.
 
 
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