Professional Day Trading

[wysinawyg]

I think people here are looking for a conclusive answer that they're never going to find. Two facts are:

- the Inland Revenue have successfully taxed a man on money he won playing cards;

- people used to think (and I'm sure had counsel and accountants advising them it was the case) that husband/wife 50/50 owned companies allowed them to use the non-earning partner's income tax threshold etc. to reduce tax paid. The Inland Revenue are currently disputing this and trying to get back taxes off of some of these people.

Now AFAIK it is incredibly rare for the Inland Revenue to tax people on betting income but taking these two things together I don't see how anyone can hand on heart say there is absolutely no chance of them asking you for tax on spread betting income unless they know all of your personal circumstances and a lot more about tax law than I do (and even then I'm not sure if I would ever take it as being 100%). So IMHO the approach should be to treat the tax benefit as a nice to have but not to rely on it. i.e. work out how much extra (through spreads, bias etc.) it costs you to trade and if this is much smaller than the tax to be saved (i.e. generally speaking if you are making large numbers of points per trade) then go for the spread betting and keep your fingers crossed the IR don't ever try to tax you, if its marginal go with the alternative.

On a risk reward basis:

Good case (probably most likely result) - you gain the amount of tax to be paid less costs of spread betting over a cheaper alternative.

Bad case (probably unlikely) - you pay the tax, you pay the costs of spread betting and you pay interest to the IR.

Worst case (can't really see it happening) - as for the bad case plus with criminal charges.

wysi

 

[Skimbleshanks]

Another alternative would be to carry on spread betting, and at the end of every month stash 40% of your winnings into a building society account. Then give the passbook to someone who promises to hand it back ONLY on sight of the IR payment demand for tax on your spread betting, if and when the IR change the rules.

If they don't, then in six years time you can treat yourself to a nice Aston Martin, chalet in the mountains, or whatever takes your fancy! And needless to say, you'll be so pleased with yourself for having the forethought to stash away the cash.

And of course you should let the person who held onto your building society passbook have the first ride in the car (or even choose the colour for you)!

:cheesy: :cheesy: :cheesy:

 

[ChartMan]

I have a nice safe place I can put your passbook, Skim. Then you can pop round to mine in six years and I'll take you for a spin in your car.....

 

[Skimbleshanks]

It's a deal. But I get to choose the colour, OK?

 

[Henry]

I don't expect anyone here to agree with me on this, but surely there is a moral argument for paying income tax on SB profits if it's your main source of income?! I know its human nature to complain about the poor quality of public services on the one hand, whilst also complaining that we pay to much tax on the other, but if I was making a good living out of spreadbetting, it seems only fair that I should "pay my way".
I can't think of any other full time occupation where one wouldn't expect to pay tax on their earnings, so I don't see why this situation should be any different.
Like I say, I don't expect anyone to agree with me, I'm just a bit old fashioned

H.

 

[bertie]

we arent talking about the moral argument for paying tax on SB profits.....i wouldnt have a problem with it personally.....i dont believe the legislation exists to tax betting income...

the simple fact is the revenue wont touch betting income with a bargepole unless the treasury decide to change the rules....i think theres a possibility with SB but not sports betting.....most people lose.....the treasury would lose money not make it.....right now the bookies pay tax on their profits.....if they taxed the punter they would have to give tax relief for the losses which would partially cancel out the tax they take from the bookies.....simple arithmetic.....

bertie

 

[cassiopeia]

H

Remember the IR agreed with the SB companies that the betting levy on punters would be dropped and a tax charged on company profits instead. Inevitably the SB companies will wish to pass this on to the punter in the form of higher spreads or bias. In other words paying direct tax on Spread Bets is effectively giving the IR two slices of tax.

 

[wysinawyg]

we arent talking about the moral argument for paying tax on SB profits.....i wouldnt have a problem with it personally.....i dont believe the legislation exists to tax betting income...

the simple fact is the revenue wont touch betting income with a bargepole unless the treasury decide to change the rules....i think theres a possibility with SB but not sports betting.....most people lose.....the treasury would lose money not make it.....right now the bookies pay tax on their profits.....if they taxed the punter they would have to give tax relief for the losses which would partially cancel out the tax they take from the bookies.....simple arithmetic.....

bertie

Sorry to sound like a stuck record but this is the thing, the law does exist to tax betting income (there is even a section in the Inland Revenue manual although it does require special circumstances), it has been used in the past (on cards if not in spread betting) and it can be done selectively so that they take from the winners but don't give relief to the losers (as said they have taxed at least one person on their income from playing cards yet they don't give relief to everyone who loses at cards).

wysi

 

[JonnyT]

wysi,

Spot on. Others should listen.

The way forward IMHO is <b>not</b> to declare the winnings, but ensure you put away 40% per annum somewhere safe and secure. The IR can only go back 6 years from memory so it will take a while before you buy that Yaught!

JonnyT

 

[Trader333]

If the IR were to insist on taxing a professional gambler there would be a good case for taking it to the European Court on the grounds of inconsistent and therefore unfair practice. Can you imagine what would happen if the Eupoean Court ruled that Tax can be levied on profits from gambling and consequently losses can be offeset against that. The government would lose a fortune and therefore the IR would more than likely drop the case than face a European ruling that would cost them hundreds of millions in tax.


Paul

 

[JonnyT]

Hi Paul,

People have paid up. You need to be incredibly wealthy to take on the IR through the courts and still risk losing.

JonnyT

 

[Skimbleshanks]

So we're all agreed then? Expect the best, but be prepared for the worst - bung 40% of your winnings under the mattress just in case, and if not grabbed by the IR it will come in handy for a rainy day in six years time.

 

[JonnyT]

Yep

 

[Dicky_Mint]

Well I'm not worried. The mug punters pay my wage, and the IR won't look at a 10-15% bonus income from my own punting. Hi skimmy do you still want to cook my dinner!

 

[bertie]

BETTING PROFITS

re jonny t post....where are these people who've paid tax on SB profits?

re wysinawyg......i've looked at the revenue manuals and maintain that the chances of the revenue pursuing gamblers are remote......case law is very strong in tax and if they tax a winner the losers would have a case for getting tax relief...

i'm up to 35 inspectors of taxes who say that the revenue wont touch SB profits with a bargepole right now......the 95% who apparently lose would wipe out the tax gained from the winners and from the SB companies.....any attempt to tax betting profits will open up a huge can of worms....

i wouldn't even bother putting away 40% of SB profits....if the law is changed and it WOULD need to be changed it won't be retrospective....

bertie

 

[Skimbleshanks]

Hey Minty! Long time no see ... you know I'll always cook you dinner (after all, pressing a button on a microwave is no problem - bit like trading really, press to start and when the time's up just press the other button).

Glad to see you're still mugging punters at the bookies!

 

[CityTrader]

Bertie.. Ihave 14 pages of A4 reply from my accountants tax expert - one point that he does make is.." the revenue regard the question as a complex one that inspectors of taxes within local districts, are not competent to answer, and the matter has to be referred to a specialist within one of their specialist divisons. Regrettably, the guidelines used by those specialists in arriving at decisions are not within the public domain"

Wayno

 

[jls483]

Could I suggest we stop this thread and stop speaking to our accountants and inspector of taxes? The number of enquiries that must now be flooding around the inland revenue would be enough to launch a public enquiry! They are going to be thinking that there is an enormous body of spreadbetters making a killing, sorry, they are going to realise that there are some spreadbetters making a tidy income from spreadbetting and will look into how they can be taxed.

Mum's the word.

John.

 

[bertie]

TAX

i'm giving up on this argument......i work in tax and have done for 20 years plus......i'm still not gonna put 40% aside for the previous six years and i won't lose sleep over it.....when you've done this job for as long as i have you get a feel for what the revenue will and won't do.....the same as the professional traders get a feel for the markets they specialise in.....

never say never but until somebody comes forward with concrete evidence that they or someone they know has been taxed on betting profits i maintain the revenue won't go near it unless the law is changed.....

bertie

 

[sidinuk]

Let's just think about this for a nanosecond. 95% of spreadbet punters lose. The spreadbet company can't lose, as it takes the spread on every single trade whatever and hedges any imbalance in the futures market to reduce risk to virtually nil. If your the Inland Revenue who are you going to tax? the punters who lose more than they win or the bookie that's almost certain to make a profit? Remember that you can't tax the 5% that win without making allowances for the 95% who lose.

Of course the best thing for the Revenue to do is levy a special tax on the bookmaker's profits, which it does.