I BET not a lot of people know this !!!

[stevespray]

As usual lots of ill-informed replies (probably including mine!)
What we DO KNOW is that there is categorically 100% NO CGT on ANY form of betting and that obviously includes spread betting.

To be self employed or a "professional" gambler or anything else surely it does not matter if you have other income or not. That's not an issue. Maybe it would have to be your main form of income.

You can pay tax twice. If you own and are employed by your company, the company will pay corporation tax on it's profit and you will pay income tax on your salary or dividends.

You dont pay tax twice!

Corporation tax is paid on net profit and not gross profit therefore your wages (you are still classed as an employee even if you own the firm) are deducted from the gross profit. Effectively Corporation Tax is Income tax for a Company where the company is a legal body just like a person would be.

 

[trader_dante]

I am not a tax advisor (obviously) but for what it's worth, I had an interview with some accountants recomended by my prop firm. They specialise in the trading industry and have a HUGE deal of experience.

The accountant told me categorically that no tax is to be paid on spread betting gains . Of course, on gains made in my futures trading account, I would pay taxes as usual.

 

[Emini-mouse]

if you trade through your company you have to pay income tax to pocket the profit. if you trade on your own account you have your CGT allowance before you pay anything

 

[ffsear]

If you pay TAX on your spread betting profits, you quite simply are getting mugged!

 

[Jaydee]

The way I see it, anything where you can say 'I won' means you don't have to pay tax - game shows, professional sports tournaments, casinos, spreadbets...anything where you 'win' money.

However, there isn't a massive amount of difference between spread betting and trading and, therefore, it's not surprising why this question gets asked so much. I'm still not 100% sure of this myself.

 

[raysor]

I am not a tax advisor (obviously) but for what it's worth, I had an interview with some accountants recomended by my prop firm. They specialise in the trading industry and have a HUGE deal of experience.

The accountant told me categorically that no tax is to be paid on spread betting gains . Of course, on gains made in my futures trading account, I would pay taxes as usual.

We have established there is no tax on gainsThe query is can the gain in some circumstances (i.e. a professional trader) be classified as income and therefore subject to income tax.

 

[raysor]

You dont pay tax twice!

Corporation tax is paid on net profit and not gross profit therefore your wages (you are still classed as an employee even if you own the firm) are deducted from the gross profit. Effectively Corporation Tax is Income tax for a Company where the company is a legal body just like a person would be.

Ok, if not salary then how about drawings? Also dividends; for a qualifying company you would get a tax credit, but for a non-qualifying company (income from abroad?) there would be a (second) tax liability??

 

[raysor]

The way I see it, anything where you can say 'I won' means you don't have to pay tax - game shows, professional sports tournaments, casinos, spreadbets...anything where you 'win' money.

However, there isn't a massive amount of difference between spread betting and trading and, therefore, it's not surprising why this question gets asked so much. I'm still not 100% sure of this myself.

Why do most successful sportsmen become tax exiles?

 

[N Rothschild]

because they get paid huge salaries as well as their winnings

 

[raysor]

because they get paid huge salaries as well as their winnings

You're just guessing now!!

 

[stevespray]

The word "Winnings" is not a good word to use to discribe making money in IR terms. If you make money via a spreadbet then your gain is considered to have been made via "a bet" or "wager".

Money made via "betting" is not considered taxable in normal circumstances.

A sportsman who wins a race, match or tournament does not win money as the result of a bet - he wins money as a result of his ability to come first (or wherever) in his particular event. Therefore his winnings are not the result of a bet. This sets winnings from a bet and winnings from a sports event apart - there is a clear difference.

Successful sportsmen and sportswomen become tax exciles to reduce their tax liability (obviously). The move to places where the rates of taxation are much lower than Britain. Most developed countries are members of a tax agreement which means that a person only has to pay tax in one place (normally the country of residence) and once tax is paid on a sum of money it cannot be taxed again in another country who are in the tax agreement.
Many people choose somewhere like Switzerland because they allow a resident to come to arangement with the government over a taxation rate. For example, it is rumours that a certain German former F1 racing driver has agreed a deal where he pays 1% income tax on all earnings.

With regard to 'offshore accounts'.... It doesnt matter where you hold an account, if you live in the UK you still have to declare ALL earnings no matter where you hold your accounts. People set up offshore shell companies for the following reasons....
If you were going to pull in a lot of money in a short space of time (take for example a premiership footballer) then you're going to pay one hell of a lot of tax (somewhere between 40% - 50% including NI). Therefore you could set up an offshore company in a location where Coperation Tax was very low (Gib / BVI). Instead of paying you directly your football club would pay invoices sent out by your offshore company. You would then draw a wage from this company but would take no where near the full amount that your football club were paying you. When you retired you could then carry on drawing a wage and ultimate avoid giving away 40% of everything you ever earned.

Steve.

 

[raysor]

The word "Winnings" is not a good word to use to discribe making money in IR terms. If you make money via a spreadbet then your gain is considered to have been made via "a bet" or "wager".

Money made via "betting" is not considered taxable in normal circumstances.

A sportsman who wins a race, match or tournament does not win money as the result of a bet - he wins money as a result of his ability to come first (or wherever) in his particular event. Therefore his winnings are not the result of a bet. This sets winnings from a bet and winnings from a sports event apart - there is a clear difference.

Successful sportsmen and sportswomen become tax exciles to reduce their tax liability (obviously). The move to places where the rates of taxation are much lower than Britain. Most developed countries are members of a tax agreement which means that a person only has to pay tax in one place (normally the country of residence) and once tax is paid on a sum of money it cannot be taxed again in another country who are in the tax agreement.
Many people choose somewhere like Switzerland because they allow a resident to come to arangement with the government over a taxation rate. For example, it is rumours that a certain German former F1 racing driver has agreed a deal where he pays 1% income tax on all earnings.

With regard to 'offshore accounts'.... It doesnt matter where you hold an account, if you live in the UK you still have to declare ALL earnings no matter where you hold your accounts. People set up offshore shell companies for the following reasons....
If you were going to pull in a lot of money in a short space of time (take for example a premiership footballer) then you're going to pay one hell of a lot of tax (somewhere between 40% - 50% including NI). Therefore you could set up an offshore company in a location where Coperation Tax was very low (Gib / BVI). Instead of paying you directly your football club would pay invoices sent out by your offshore company. You would then draw a wage from this company but would take no where near the full amount that your football club were paying you. When you retired you could then carry on drawing a wage and ultimate avoid giving away 40% of everything you ever earned.

Steve.

Very good explanation. But isn't the agreement usually a "double-taxation relief" , so you cannot pay more tax than you would in your country of domicile. So if you pay half of your tax offshore you still have a liability for the other half if you come back to your own country. and that includes coming back to die! (although you wouldn't worry about that) If you pay the full rate abroad then you won't pay anymore back home.

 

[Jaydee]

Many people choose somewhere like Switzerland because they allow a resident to come to arangement with the government over a taxation rate. For example, it is rumours that a certain German former F1 racing driver has agreed a deal where he pays 1% income tax on all earnings.

Isn't F1 different though because they are paid a salary which would be regarded as earnings and not prize money? Whereas a golf or tennis pro will win prize money - they may have earnings from sponsorship, advertising, etc but in the UK their prize money is safe from tax.

 

[N Rothschild]

or just move to monaco and pay 0! or the bahamas

 

[raysor]

I think we have established, beyond all reasonable doubt, that we don't know! LOL

 

[mkhall]

If you put a £1000 pounds on a horse and it comes in you dont pay tax, isn't it exactly the same as that!

 

[stevespray]

This is going around and around in circles and no one can provide the answer because there is no definitive answer available.

The answer to the question pivots on whether the Inland Revenue can reasonable declare that someones profession is that of "Professioal Gambler". When they went to court in the past the IR failed to make it stick. Rules or potential outcomes may have changed since the 1930's. My local IR office tell me that there is someone in my tax area who is classed as a professional gambler - this means that his sole income is derived from the practice know as 'betting'.

Sportsmen who win races are not winning 'bets' but instead are winning what is classed as 'prize money' which is taxable as Income Tax.

Steve.

 

[nine]

In Australia the definition applied is:

If you are making a high number of trades and are profitable year by year then you are not a gambler ... you are a tax paying trader. High is apparently, more than a few a week.

 

[mkhall]

If you are a company it is taxable and fall's under corporation tax. If you are an individual it is tax free, as it is exactly the same as betting on the horses.

I hope this help's.

Best mkhall

Lucky you had that stop!
For serious investors only: Stirling Chase & Co.

 

[raysor]

If you put a £1000 pounds on a horse and it comes in you dont pay tax, isn't it exactly the same as that!

Keep up!
I think we have established that the profit from betting does not attract CGT (or in the normal course of events Income Tax) so yes, you are right; on a £1000 bet or any amount bet the winnings are not taxable as it would be if you traded (bet even) shares in the market or on a CFD. Here the profit would have a liability to CGT.
The question is can the winnings from betting ever be classified as "income" in certain cases and therefore have a liability to Income Tax.
Or, in fact if you set up a company whose activity was betting. Would that company be liable to Corporation Tax on it's profit?