Potential mass exodus from Spreadbetters.

FXX

I refer you back to the link in my earlier post 118 which goes to HMRC papers.

CG56105 describes spread betting and concludes “ ...no assets are acquired or disposed of and no chargeable gains or allowed losses arise from spread betting.”

BIM 22017 describes a professional gambler and confirms that his betting income is not taxable even if it is his sole means of livelihood. It also draws atttention to related activities that may require his betting to be included in the whole and taxable.

These papers are not drawn out of thin air. They are the guidance HMRC give you.

Barjon I believe you have mixed articles up and using them incorrectly in your reference.

Getting CG56105 out the way first as it falls under the capital gains manual and spread betting is not subject to capital gains tax.

BIM 22017 falls under the income manual but you have referred to the incorrect article. This article is for gambling and bookmakers. Under the category of "Meaning of trade: exceptions and alternatives: contents" there are 15 articles and each pertain to a different type of exemption and classification. In the case of Bim 22017 , it refers to the professional gambler and has no mention of spread betting. Bim 22020 on the other hand is directly referring to spread betting. here is Bim 22020 wording:


"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."

Now if you browse spread betting market makers like CMC and IG to name just two, they mention it is not subject to capital gains but further mention that tax treatment depends on individual circumstances (this translates into income tax for those who trade as their sole income)

The devil is always in the detail and i think you are curve fitting the rules to suit your argument. Why would HMRC state that the professional gambler is exempt from tax while also stating that spread betting is only tax free when it is not in context to being a professional trader. They are not mutually exclusive
 
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Barjon I believe you have mixed articles up and using them incorrectly in your reference.

Getting CG56105 out the way first as it falls under the capital gains manual and spread betting is not subject to capital gains tax.

BIM 22017 falls under the income manual but you have referred to the incorrect article. This article is for gambling and bookmakers. Under the category of "Meaning of trade: exceptions and alternatives: contents" there are 15 articles and each pertain to a different type of exemption and classification. In the case of Bim 22017 , it refers to the professional gambler and has no mention of spread betting. Bim 22020 on the other hand is directly referring to spread betting. here is Bim 22020 wording:


"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."

Now if you browse spread betting market makers like CMC and IG to name just two, they mention it is not subject to capital gains but further mention that tax treatment depends on individual circumstances (this translates into income tax for those who trade as their sole income)

The devil is always in the detail and i think you are curve fitting the rules to suit your argument. Why would HMRC state that the professional gambler is exempt from tax while also stating that spread betting is only tax free when it is not in context to being a professional trader. they are not mutually exclusive


Yes, that’s right. But since it’s betting the BIM reference details what is “trade” “having expertise or being systematic is not enough”.

I’m not making an argument, just pointing out the references I was given by HMRC - then the Inland Revenue - when I enquired some years ago.
 
There's a lot of things the HMRC could one bright day decide to do, and its imaginable that they might wish to subject a highly efficient financial spreadbetter to income tax. But they would need firstly a compelling reason to do this, secondly a substantial probability of success, and thirdly (and most importantly for staff in the public sector) no possibility of blame for a decision gone bad (better to make no decision than to make a bad one).

We're only concerned with financial SB, but its possible that a new hawkish policy here could have implications across the hugely wider gambling sector. And if we accept there are always more losers than winners in gambling, it would be hard for the HMRC to be sure that the winners would end up paying more tax than the losers could claim back.

On top of which, the fear of punters being income taxed might deter many of them, and the tax take from the gambling sector as a whole, including ts employees, might actually fall.

Imposing income tax on financial SB sounds like a gamble to coin a phrase. Seems like a can of worms HMRC would probably wish to keep shut.
 
"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"
In my view, the meaning of "the carrying on of that trade" has wide scope in meaning and the word "trade" can be substituted with "services"; or "business". The scope of the Inland Revenue is to tax income from business activities and "spread betting" can be caught within that net if the activity of spread betting is deemed part of carrying on of that trade rather than as a gambling activity.

Originally I interpreted the "carrying on of that trade" to mean full-time spread-betting. However, I now think it means if you run a spread-betting firm and also take a punt on the markets while running the firm, then your profit of your bets will be taxable because you are carrying on of that trade i.e. spread-betting firm. This is what it implies here: http://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim22019

In my view it is important to contrast the meaning of running a spread betting firm as opposed to the meaning of carrying on a business which happens to involve spread betting. The former is narrowly focussed on the activities of spread betting whereas in the latter, the net is much wider in terms of what may constitute as the carrying on of a business. Generally in taxation terms, the carrying on of a business may include the following :
1)the nature of the activities, particularly whether they are intended to be profit making;
2)the intention to carry on a business;
3)the degree of repetition and regularity of the activities, including whether the activities are carried on in a business-like manner; and
4)the size and scale of the operations
Broadly, if a firm is established and maintained to make a profit for its owner and its assets are invested in activities intended to make a profit, it is likely that it will be carrying on a business in a general sense. The meaning of "firm" may include a sole individual that is carrying on a business.

BIM22019 and the associated case laws mentioned clearly illustrate some of the above points such as :

In Down v Compston [1937] 21TC60 a professional golfer attached to a golf club habitually engaged in private games of golf for bets of varying amounts and won substantial amounts. He was found not to be liable to tax on professional income on the basis that the bets did not arise from the playing services and that there was no organisation to support the view that he was carrying on the business of betting on the games of golf.

In Burdge v Pyne [1968] 45TC320 the proprietor of a registered club which provided gambling facilities, including a card room, won considerable sums of money from three-card brag which he played regularly with members in the card room. He was taxable on his gambling winnings.
Pennycuick J stated at pages 323 and 324:
‘…the Appellant was carrying on the business of a club; upon the club’s premises he habitually played the game of three-card brag with other members of the club; and at that game he was invariably successful… Given those facts, it seems to me that the Commissioners came to the right conclusion in finding that the winnings of the Appellant from three-card brag did represent a receipt by him in carrying on the business of the club.

Spread betting is deemed a betting activity and is not subject to tax because it is considered revenue negative to go after spread betters. https://www.forbes.com/sites/timwor...-it-wouldnt-produce-any-revenue/#1b4e0b87a2f2
In my view it is a farce because spread betting say UK shares would be no different than actually trading UK shares but there is no exemption from tax on the latter.

It is my view that the angle on which the tax authorities may decide to go after profitable players would be on the basis that they are carrying on a business and spread betting is simply incidental to the case. Therefore the facts matter in that whether your profits from spread betting is derived from an organised structure that fits the meaning of carrying on a business.
 
The is the way I now see it:

I make a bet with someone that a stock market index will close higher than it did the previous session and I win. My profit is tax free because I think I could clearly demonstrate to HMRC that this is “merely an irrational agreement that one person should pay another person on the happening of an event."

Let’s say I begin with small amounts of £20 but get so good at predicting the index that I raise my stake to £1000/bet and I do it full time on a daily basis. If my yearly income is now £200,000 it will still be tax free because I could clearly and unambiguously demonstrate that all of my income is made from an irrational agreement that one person should pay another person on the happening of an event. i.e. A bet. Even though I am making many bets in the year the HMRC has set no limits on the quantity. Each bet is based on the outcome of an event, which could be demonstrated to be unpredictable.

Now let’s say I change my activity. I decide that instead of just making a bet on how an index will close, I start taking bets from people in either direction. My goal is not to make money by being right on how the index will close. My goal is to make a profit from more people being wrong than right. This now has changed the nature of my activity because I could no longer demonstrate that my profits are based on the happening of an event itself. My profits are being generated by other people betting on the happening of the event. It would be in this case that the HMRC would view my activity as the carrying on of a trade rather than an opportunity presented by a trade. My income would now be taxable.
 
Hi

Its some time since I visited the forum... and I am doing so to try to read up about the ESMA situation.

It may take me some time to try to read thru the posts about it on this thread or other related ones on T2W...to try to catch up and gain a better understanding..

On a initial attempted search for info on ESMA ...I get the impression that this maybe the most informative thread about the topic... (or is anyone aware of other related threads that maybe as informative) Also is this just spread bet related...Is there a thread on this for say CMCs or futures trading in ref to ESMA ? that may also be recommended if anyone is aware of ?

I assume you guys have looked for alternatives or other companies outside the EU that Spread betters could use...I think I seen one ref to one in OZ...that allows us to trade at similar rates as we presently have before ESMAs brought in...BUT I am doubtful there will be ones similar to what the likes of IG index may offer... with things like Wall st daily options that you can trade as very low stakes....

I was just in a discussion with IG index and I was informed that its looking likely that they will bring in the new regulations from July 1st 2018... when I spoke to them about it maybe 2 weeks ago they said that they were unsure..and had told me it would not occur instantly in one go.. and that it would be gradually brought in... rather than as an immediate increase in Margin by 10 X...

For smaller traders... I think this will stop a majority of them...

Just how many clients are small traders compared to richer clients... I am unsure...

I wonder what the % s are ?

So f you dont have 500K in assets or have a backgound in Finance...

Is there any other way to become accepted under their PRO trader alternative option. ?

Theres a ref to maybe 25% of people being accepted by the likes of IG who have applied..

not sure how anyone would get to know that unless IG has informed them..

so was most of them qualified as they worked in Finance or were just rich enough ?

Also how long is this likely to be applied... is it a pre brexit move.. by the EU...

what will happen if or when we come out of the EU..

On asking IG.... they said at the moment that are unsure, but it maybe possible that things could change back....


It seems to me its ts an EU ploy to keep the common man having even less chance to prosper..

why are they not doing this with other types of betting if they are so concerned its leading some financial traders to too much risk ?


or is it due to the TAX free issues... but that only applies to spread betting and not other leverage types of trading thru std brokers..
 
"The new rules, formalized by ESMA in late March after a lengthy (and somewhat contentious) consultation period, will come into effect as follows:

Binary Options – from July 2, 2018 – a prohibition on the marketing, distribution or sale of binary options to retail investors.

Contracts for Differences – from August 1, 2018 "

https://www.leaprate.com/forex/regulations/esma-dates-binary-options-ban-cfd-leverage-cap/


https://www.esma.europa.eu/press-ne...intervention-measures-cfds-and-binary-options
 
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Has anyone been able to find an Aussie/NZ/Canadian broker who will a) accept accounts from UK-based customers and b) offer spread bets (not just CFDs)?

I've contacted loads and so far have found none that match that criteria - either they insist I use their UK-based branch e.g. Pepperstone, or they do not offer spread bets e.g. IC Markets.

I really, really dislike ESMA :mad:
 
Has anyone been able to find an Aussie/NZ/Canadian broker who will a) accept accounts from UK-based customers and b) offer spread bets (not just CFDs)?

I've contacted loads and so far have found none that match that criteria - either they insist I use their UK-based branch e.g. Pepperstone, or they do not offer spread bets e.g. IC Markets.

I really, really dislike ESMA :mad:

Read the thread.
 
Has anyone been able to find an Aussie/NZ/Canadian broker who will a) accept accounts from UK-based customers and b) offer spread bets (not just CFDs)?

I've contacted loads and so far have found none that match that criteria - either they insist I use their UK-based branch e.g. Pepperstone, or they do not offer spread bets e.g. IC Markets.

I really, really dislike ESMA :mad:

Don’t be to hasty to disregard CFD’s. Do the maths and calculate whether or not you would be subject to CGT..you might find a level CFD playing field as opposed to kicking a ball up Everest with spread betting broker.... IC markets still offering 500/1 leverage.
 
Thanks Mike. My strategy is to continually buy small amounts and hold them for years, adding cash monthly to cover the downturns. At first glance, I think the daily interest of CFDs will cost me a lot. I also like not having the tax considerations (both not paying tax and not having to go through any extra pain on the self assessment!)
 
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Don’t be to hasty to disregard CFD’s. Do the maths and calculate whether or not you would be subject to CGT..you might find a level CFD playing field as opposed to kicking a ball up Everest with spread betting broker.... IC markets still offering 500/1 leverage.

Yep, had the heads up from IG earlier this week, that it all starts on 1st August for the instruments I trade.

I've just opened an account with IC Markets and plan on spending the next 8 weeks getting used to the platform so that it's all good come August.

Pretty gutted that it's come to this but hey ho, just one of those times to buckle up and adapt to the changes.

All the best to you all, hope this all doesn't affect you too much.
 
Hi everyone - I'm an academic researcher trying to understand the impact of leverage changes on spread betting. I've found some mixed commentary across the web and created a survey to evaluate a larger sample size of spread betting users.

I'd really appreciate it if y'all would take the survey - it shouldn't take more than 2 or 3 minutes. Here's the link - https://www.surveymonkey.com/r/XKBQ8PT

Thank you in advance!
 
Yep, had the heads up from IG earlier this week, that it all starts on 1st August for the instruments I trade.

I've just opened an account with IC Markets and plan on spending the next 8 weeks getting used to the platform so that it's all good come August.

Pretty gutted that it's come to this but hey ho, just one of those times to buckle up and adapt to the changes.

All the best to you all, hope this all doesn't affect you too much.


CTrader or MT4 platform. ?
 
What about Switzerland? Dukascopy Bank in Switzerland say they are not applying ESMA rules, but their Dukascopy Europe subsidiary in Latvia will of course have to. Dukas offers forex, CFDs and binaries but no SBs (I guess SB is a purely UK thing because it depends on UK tax regs).
I can't imagine the EU will be very happy about a broker just over the border in Switzerland providing a way to get around the regulations...

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6 June 2018
DUKASCOPY BANK WILL KEEP LEVERAGE UP TO 1:200 & BINARIES
ESMA's recent restrictions imposed upon brokers of the European Union (EU) raised many questions.
Dukascopy Bank is regulated by the Swiss Financial Market Supervisory Authority FINMA and applies the highest standards of transparency and integrity.
Since Dukascopy Bank is in Switzerland, which is not a member state of the EU, it will not apply ESMA restrictions (neither on leverage, nor on binary options or others). ESMA restrictions will concern only Dukascopy Bank's European subsidiary − Dukascopy Europe, which will be fully compliant with new European regulations.
For further information on this matter please read FAQ.
 
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