Professional Day Trading

[bertie]

TAX AND SPREAD BETTING

i work in tax and profits from any form of betting including spread betting are NOT taxable even if they are your main source of income.....anybody who tells you differently is wrong.....

if the profits from betting were taxable as trading income, the losses would be deductible from other sources of income for tax purposes and taxpayers would be subsidising the idiots who waste money on the horses and dogs......

gordon brown and any future chancellor will never make betting profits taxable.....the downside for the treasury would be too massive to contemplate.....

bertie

ps tax is only a temporary measure.....its been that way for about 400 years!!....it was introduced to fund a war against the french i think

 

[tomorton]

Asked my accountant re income tax for traders about 3 years ago - says cases on record show Revenue refusing to income tax traders even though they applied to be IT'ed and were doing 60-70 trades per day. Told me to forget it. I nearly did.

 

[fltbear]

bertie
Thanks for the benefit of your wise counsel.
I'm sure CMC, IG Index William Hill, Corals etc will be clamouring to pay handsomely for your professional advice.
Good luck and make sure the insurance premium is paid.

 

[Trader333]

The issue of whether tax is payable on spreadbetting has caused much disagreement on these boards. One of the reasons for this is that depending on which tax office you speak to, you can get a different answer and therein lies the problem. There is a lack of consistency on this issue and until it is properly addressed there will always be disagreement.

As a general policy, the government is unlikely to impose capital gains tax on spreadbetting gains because if it did then all the people who lose, (around 95%), could offset this loss, (with no current time limit), against any capital gains and the net overall loser would be the government.


Paul

 

[mmillar]

Currently, CGT losses can only be used from the 1996-97 tax year onwards, and only if you have declared those losses on your tax return each year.

http://www.inlandrevenue.gov.uk/pdfs/cgt1.pdf


Though I suppose if they suddenly changed the rules everyone would have an arguable case about why they hadn't previously declared their losses.

 

[fltbear]

Paul

What is misunderstood is the position concerning tax on income not on capital gains.

The position there, IMO, is quite clear. In non forensic terms, if spreadbetting (or any other form of betting) is taken by the IR to be a person's trade or profession they will seek to levy income/corporation tax on the profits. Different rules then apply to the treatment of losses.

 

[jls483]

Well it sounds as if we have two opinions, strongly held and completely contradictory. Why don't we all go to our local tax office and then put our findings in a poll? Or why don't we just keep quiet about it and hope we never get caught AND live under the auspices of a tax office which believes professional spreadbetters should be taxed?

I think it is most likely that a tax office could decide you a professional spread better and decide to charge you income tax on your winnings. Presumably once they have declared you professional then you will be able to offset future years losses against other income. I think it is unlikely that an individual could go to the IR and say please treat me as a professional spreadbetter and here is my first years losses. It would have to be an initiiative of the IR.

John.

 

[bertie]

CGT LOSSES & TAX ON SB PROFITS

RE MMILLAR POST.....cgt losses from pre 1996/97 are available to be carried forward indefinitely until they can be utilised against taxable capital gains......

i've seen loads of posts on spread betting and income tax since my first post.....profits from spread betting are NOT repeat NOT subject to income tax or capital gains tax under current legislation even if those profts are your main source of inome (tax law can change but given that more people lose than win the law is unlikely to change as the treasury would lose a packet and taxes would have to rise to compensate)......if anybody has been told they are taxable by an inland revenue employee they have been misled......it wouldn't be the first time nor will it be the last.......

i do a little spread betting as well as trading in actual shares.....the gains on the shares are potentially subject to capital gains tax but the profits from SB are not taxable in any shape or form.....

bertie

 

[mmillar]

bertie,

I know nothing about tax except what I read in IR documents. The IR document I linked to says you can't claim CGT prior to 1996/97, and only if it has been declared each year. Is it possible for you to post (or PM me) links or information that, as you say, allows CGT losses to be carried forward indefinately. Sorry, this is probably a bit aside from the main topic but whilst I have a tax expert on the line...

cheers

mmillar

 

[bertie]

CGT LOSSES

hi mmillar......the one thing the revenue do have going for them is a fantastic website.....

CGT losses incurred in 1996/97 et seq should have been claimed in the tax return for the relevant year but not all taxpayers or, for that matter, accountants have done so in the past.....

what the revenue are saying is that in order for you to be able to carry forward CGT losses indefinitely you have to notify them that the losses have been incurred within 5 years and ten months of the end of the tax year in which they were incurred.....the first year this applies to is 1996/97 (the first year of self assessment) so if you incurred cgt losses in 1996/97 you should have told the revenue by 31 january 2003.....where i work we will claim the cgt losses any of our clients incur on the tax return for the year in which they were incurred.....this puts them on our computer which doesnt forget!!......it may be 10 years before they are used.....

pre 1996/97 cgt losses are still allowable and should be claimed asap.....they even have their own box on the cgt pages of the tax return.....hope that clears that up....

for anybody still concerned about tax on betting profits.....don't be.....if the revenue ask you how you bought that mercedes on your paltry salary from your day job.....show them your SB statements and i guarantee they'll go away......think of it this way.....i have one bet each year on the grand national.....think of all the claims that will be made if the losses from that one race were allowable.....it would be totally unmanageable from the revenues point of view.....

i'll freely take up anybodys case if the tax office try to tax you on SB profits.....that's how confident i am that it will be a five minute job.....


bertie

 

[mmillar]

Re: CGT LOSSES

Thanks for your reply.

i'll freely take up anybodys case if the tax office try to tax you on SB profits.....that's how confident i am that it will be a five minute job.....

If they come after me I will take you up on that

Cheers

 

[CityTrader]

-.well I've decided to invest a few hundred pounds. My accountant has instructed a tax expert to investigate the situation. It's not at all clear cut- asked him to get someone onto it yesterday. Probabaly going to cost me £300+Vat - so if anyone wants a copy of the report when i get it back, let me know..

W

 

[Wideboy]

Can't you just classify yourself as a 'professional gambler'?
The guys who gamble daily on the horses don't pay income tax on their winnings, so why should you on spreadbets which is just another form of gambling.

Wideboy

 

[wysinawyg]

Bertie,

What exactly is it you do for a living? Only from what I know the advice you are giving is somewhat dangerous and not necessarily correct. Just to be clear I am a lawyer at one of the big London law firms although not a tax lawyer so this isn't something I can claim to be an expert on but...

A quick look at Simon's Direct Tax Service says that gambling winnings can be taxed if it is associated with a trade separate to the gambling itself (which suggests to me that if you trade actual shares or futures and also spread bet on them you would fall under this category). We also have reference to the case of Cooper v Stubbs (which I haven't read) where the Court of Appeal apparently made a distinction between wagering and speculation. And I've just managed to find the other case I had heard of Burdge v Pyne which is where the earlier point comes from. Somewhat telling here is that I found this in the section of the Inland Revenue's Inspector's Manual under the heading "Betting and Gambling - when gambling winnings assessable".

Now as said this isn't my specialist field, but the fact that there is a section in the Inspector's Manual on when gambling winnings are taxable makes me feel you are being somewhat robust and potentially misleading with some of the things you've said about their being no possibility of spread betting being taxable (unless you know something I don't). Having said that I don't know of anyone who has been taxed (although I don't know that many people who spread bet) but even if there aren't any it doesn't mean they can't (take for example the current furore over husband + wife companies).

wysi

 

[jls483]

Bertie said: for anybody still concerned about tax on betting profits.....don't be.....if the revenue ask you how you bought that mercedes on your paltry salary from your day job.....show them your SB statements and i guarantee they'll go away.

Bertie we are not talking about people that do spreadbetting in addition to their day job. We are talking about people who do not do a day job, but make 100k on spreadbetting. Do you still think they should pay no tax?

 

[RogerM]

An interesting thread. With regard to carrying forward CGT losses, I think I am correct in saying that when you carry forward a loss, it must be set against gains before you use the current years allowance.

So, if you have a £10,000 loss, you pay no tax in that year. In the following year you make a £5,000 gain, and this is set off against the loss carried forward and NOT the current years allowance, which you effectively lose. In the following year, if you make a further £6,000 gain, this is first set off against the remaining £5000 of losses that have been carried forward, and £1,000 is then set off against that years allowance. Still no tax to pay. Your losses have now been absorbed, and in the following year (say 2002/2003) a gain of £10,000 will have the CGT allowance of £7,700 set off against it, and £2,300 will be taxed.

 

[nautical]

I think there's another point here which we haven't touched on.

Is spreadbetting actually "betting" in the true sense?Spreadbetting as we know it (not the Fixed Odds stuff) simply involves the purchase of a time-limited instrument, not unlike an option, that increases/decreases in value over its life broadly in line with the underlying stock/index/commodity on which it is based. As such any gain/loss is derived from the growth/fall in the value of that instrument. This is not the same as a bet which is a gamble at fixed odds on a specific event occuring (or not) e.g. a horse winning a race, or a football team winning a match by 2 goals.

So in summary, I do not see spreadbetting as a "betting" activity. It is merely the purchase of an instrument (like a share) held for a period of time with a view to capital appreciation. If any tax were to apply, therefore, it should be Capital Gains and not Income Tax and we know what the position is on that.

More food for thought.

Chris

 

[jls483]

Chris,

I agree that fact you can cash in a financial spreadbet at any time makes it more like investing than betting and you would think it should be liable to CGT, but as somebody has already pointed out apparently most people lose at it so although the government loses out on those of us that make a profit from it, they would lose more from declaring it liable to CGT and allowing thousands of speculators losses to offset their other gains.

John.

 

[bertie]

i stand by what i said in previous posts.....current tax legislation does not subject spread betting profits to tax......the key word here is "betting".......i've spoken to five inspectors of taxes today in the course of my work as a tax consultant and they all agree with what i've posted before.....

i think that as the popularity of SB increases and the distinction between SB and trading futures etc blurs even further the treasury may look at taxing SB profits......at the moment it really is irrelevant if your main source of income is spread betting profits......they are NOT taxable......

bertie

 

[JonnyT]

Hi Bertie,

Others have posted cases where the IR has deemed SB profits as taxable. To defend in court is not an option unless you are loaded. They apparently paid up.

JonnyT