Spoke with IR regarding spreadbetting tax

[pineappleman]

Hello

Yes I know it's been done before about spreadbetting tax, but I still see very clearly that NO-ONE knows the answer on this forum about whether you do pay any form of taxes if you spreadbet full time as your income. Some say yes, some no, some maybe, etc...

Let me repeat the situation: if you spreadbetted as your main/only income (not on the side of a higher paying day job) and you were earning let's say £10M a year (LOL!) would you have to pay 1p in any form of tax or could you live forever tax free making a huge income?

I spoke with the IR and the reason I'm posting this is because I got a new answer, I think.

If you are spreadbetting on financials you will have to pay CGT (capital gains tax) but not income tax. That's right, I have used the words "spreadbetting" and "CGT" in the same line, I have NOT confused this with CFDs. But here's the interesting thing: If you are spreadbetting on SPORTS events then no tax at all is paid. They do make a difference between "financials" and "sporting" believe it or not.

Sports are seen as a "nothing" bet as there is nothing physical behind the bet. A financial market is seen as a "substance" bet as there is a physical market behind the bet. If you make £10M a year betting on Man United through IG you pay nothing. Make the same amount betting on the FTSE through IG and you pay CGT, but not income tax.

I know spreadbetting comapnies always state it's tax free, and this is true of income tax it seems, but not of CGT - if it's financial markets you are betting on.

This is what I was told by the IR, very specifically.

If this is true, surely CFDs are a better option than spreadbetting?

Or have I/the IR got this wrong?

So this is another twist in this very grey area it seems - I think I may just pay for an hour with a City accountant to clear this up once and for all because it's both amazing and depressing that everytime you ask a new person you get a new answer.

THERE MUST BE ONE SOLID HONEST-TO-GOD ANSWER ABOUT THIS!! Somebody is lying or doesn't know what they're talking about: either the spreadbetting companies in the UK or the IR.

Any thoughts/disgreements? Please thrown them in!

Pine

 

[arabianights]

I am pretty sure the inland revenue have got it wrong. I don't even see how they could measure CGT

 

[donaldduke]

I dont know of anyone who has ever paid tax on spread betting profits, or been chased by the IR for tax related to spread betting.

There may well have been cases of ignorant HMRC inspectors going after spread bettors in error and some of those may even have paid up with out a fight.

There are over 200,000 members on trade2win.. has anyone here been asked by inland revenue to pay tax on spread betting profits?

The only grey area i know of is someone is mixing real trading with spread betting the same markets. But that isnt pure spread betting then is it?

 

[Splitlink]

Can spreadbetting losses be set against other earnings?

 

[anley]

Can spreadbetting losses be set against other earnings?

if you're forced to pay tax on the spread betting income then yes.

Just remember this the government is desperate for cash and has had strong words with the IR to squeeze more from people. So you can bet that anyone making 6 figures+ from spread betting who doesn't have another job will be targeted, if they know about them.

Sadly I'd put money on the taxman winning because a) they're pricks and more importantly b) they're often the law and can change the goalposts mid-game.

The sensible option for any big earners in spread betting is this -

1. Do everything possible to stay under the radar, so you're a complete mug if you think it's cool to drive a big flashy car with a private number plate (the motorway Police have long reported to the IR private plates attached to cars they see, especially very expensive ones)

2. Keep quiet when it comes to friends and family. Just tell them you trade the stockmarket using a traditional broker (most won't understand anyway but keep the phrase 'spread betting' out of the way)

3. Keep 40% of your profits back to pay any tax and/or court case. Nothing like having a sensible cash stash anyway, it's only prudent.

 

[pineappleman]

Thanks guys and gals!

Anley: you seem a wise person, love the advice. Keep enough back just in case and don't go throwing it in people's faces, great advice.

Donaldduke: yes I don't know of anyone either who has paid tax on SB, so hopefully we can never get into trouble if we just simply don't declare it and then if ever challenged just get a decent lawyer to beat the taxman.

And if we pay tax then yes we can offset against other earnings but it shouldn't come to that, right? As we shouldn't pay tax!

At the end of the day, if gambling winnings are tax free in the UK then surely that is the answer that would win in a court of law, no? Surely the judge would HAVE to declare we don't pay a penny as no man is above the law. Surely it's that simple? Surely they cannot change the law "on the day in court" to target one rich guy doing well through spreadbetting?

Let's hope so.

It just got me even more confused when this IR guy talked about "CGT" but I did note his wording was very "specific" and he was talking like a politician in that he wouldn't deviate from his staple answer, or even change the wording. Plus he kept bringing the conversation to CFDs away from spreadbetting, as if he was trying to subconsiously tell me we should be trading CFDs not SB! LOL I know it sounds crazy but the moment I finished speaking with him I just didn't feel "right" about what he had said.

Like Anley said, our broke government is surely out to squeeze anybody who is doing well in life and so I can see the IR knocking on the door of anyone who is clearly doing well but not filing a penny in tax.

I think we have to have faith in the legal system on this one, and that's a huge thing for me to say as I have very little faith/respect in our legal system for personal reasons!

Surely though the IR cannot touch us on this one!

Pine

 

[donaldduke]

The sensible option for any big earners in spread betting is this -

1. Do everything possible to stay under the radar, so you're a complete mug if you think it's cool to drive a big flashy car with a private number plate (the motorway Police have long reported to the IR private plates attached to cars they see, especially very expensive ones)

2. Keep quiet when it comes to friends and family. Just tell them you trade the stockmarket using a traditional broker (most won't understand anyway but keep the phrase 'spread betting' out of the way)

3. Keep 40% of your profits back to pay any tax and/or court case. Nothing like having a sensible cash stash anyway, it's only prudent.

Total waste of effort, trying to hide it, although saving money is always good.

If the inland revenue are serious about going after spread bettors for tax, all they need do is ask the big spread bet firms (there arent that many) for a list of all punters making >50K, i doubt the list will be very long anyway.

 

[pineappleman]

Total waste of effort, trying to hide it, although saving money is always good.

If the inland revenue are serious about going after spread bettors for tax, all they need do is ask the big spread bet firms (there arent that many) for a list of all punters making >50K, i doubt the list will be very long anyway.

Yes but the issue surely is "would they" and "could they".

Why would they if gambling is tax free?

Anyway, it seems to be the consensus that it is totally all-tax free and in most cases you wont ever be confronted by IR about not declaring it and frankly if you are confronted you probably stand a decent chance of winning due to a little thing called "law".

LOL what does the TV advert say? "Tax doesn't have to be taxing"...?

 

[gc1]

Pine,

If you think they might be giving an answer that might apply try asking them how one would fill in the capital gains section of the SA form for spread bets. The form has boxes for the £ value of the asset when bought and the £ value when sold. I can't see how any meaningful value could be filled in as you are not buying or selling anything.

 

[donaldduke]

Pine,

If you think they might be giving an answer that might apply try asking them how one would fill in the capital gains section of the SA form for spread bets. The form has boxes for the £ value of the asset when bought and the £ value when sold. I can't see how any meaningful value could be filled in as you are not buying or selling anything.

That is a good point.

I think if HMRC were to come after you on the basis of 'you are doing it full time and it is your only/main source of income' argument it would be income tax, not CGT, that they would demand.

 

[pineappleman]

That is a good point.

I think if HMRC were to come after you on the basis of 'you are doing it full time and it is your only/main source of income' argument it would be income tax, not CGT, that they would demand.

Yes see I thought this, this is part of the confusion... but the guy from IR said a 100% "no" to income tax regardless of whether it was your only income or not as long as it is classed a gambling (whether financial or sports)... but he kept on and on about capital gains tax and said you would get picked up on that.

So no for income tax, yes for CGT.

Thing is, like I said before, he wasn't vague or distant but he was talking like a politician in that he wouldn't deviate from the same scripted responses and he kept on bringing CFDs into the conversation - I think the IR in general has been well trained to make sure they scare people into paying them no matter what. 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!!!"

I think the answer is just don't declare but keep all paperwork in case you're ever challenged by them. And maybe speak to a recommended tax adviser in the meantime to put the full stop on it.

gc1: very good call! LOL! But I fear they would have a smart-**** answer for that

 

[speedtrip]

Helpful thread and im just trying to clarify the position.

Ive seen the statements on the HRMC site and seems more likely it would be income tax on basis that we are not trading CFDs.

As for spreadbetting we are not trading the underlying contracts so they do not expire so you cannot calculate the difference in price in the way you might do on CFDs.

If they do differentiate Sports v Financial Trading (wheres that stated) then if you could generate suff income for essential needs that would be tax free and you may avoid top up from spreadbettting.

Another point is that the UK govt will take vast somes of Corp Tax from Spreadbetting Companies and they moment they take on the spreadbetters suddenly it becomes less attAractive to the better.

I would think that the CT from the likes of IG etc will far greater than that possible from the 5% of succcesful traders.

ST

That is a good point.

I think if HMRC were to come after you on the basis of 'you are doing it full time and it is your only/main source of income' argument it would be income tax, not CGT, that they would demand.

 

[diviano]

Spreadbetting and tax has allways been a 'grey' area so I did speak to an accountant who is still researching the area but did inform me that there is a spreadbetting return form.

General Betting Duty Spread Betting Return - form BD211A.

The form can be downloaded from HMRC website. I was not aware of this form and am still strying to work out what it all means.
If anyone has filled one out before your advice would be most helpful.

Thanks

 

[Hoggums]

I think the tax man was getting confused with CFM50380 which states the following:

A financial spread bet, if entered into by a company, will also be a contract for differences. The essence of a spread bet is that the punter wagers on either upward or downward movement in a particular index or the price of a particular subject matter. It would be unusual for a company to place such a bet - most companies are likely to be prohibited by their Memorandum and Articles of Association from out-and-out gambling

But this is refering to a company making a spreadbet - not an individual.