Spread betting tax situation

[stevespray]

This thread keeps going round and round in circles because there are many variables in any given case.

Firstly, everyone has a different tax office depending on where they live in the country and these tax offices often give out slightly differning information. Some tax inspectors might provide advice which is 100% mechanical in nature where another may well introduce an element of 'ethical principle' (ie is it fair that someone might earn (win) £100k and not pay a penny in tax?).

Secondly, there are a number of different situations that a potential tax payer my find themselves in. I think that it is pretty clear that someone who pays tax on another income source will never have a problem if they make money via spreadbetting. The crux of the matter really relates to someone who makes their sole income through spreadbetting.


I've been spreadbetting for around 12 years. In that time I have noticed a change in the way that these firms promote the 'tax free status' of their product. 12 years ago they used to state that profits were 'tax free' period. Today the advertising is different and there clearly appears to be more of a play on words with various caveats designed to protect the advertiser - this appears to me to be an admission that things may not be quite as black and white as they used to be.

In terms of the 1925 case which is often touted... All I would say is that it was a long time ago and clearly things have moved on somewhat.


Hope this helps
Steve.

 

[Vaco]

If things had moved on then their would be a statutory law or case law which would overide it, in the ababsense of both the case law still stands, ethics and bully tactics by the tax office are irrelevent.

 

[Amun-Ra]

Stevespray and Vaco - When I first started looking into the tax implications of being a fulltime professional spreadbetter (with no other income whatsoever), I took a look at HMRC's website and initially agreed with Vaco. BUT, having looked at HMRC's site, it's obvious that it's a grey area and specific legislation would be most helpful. However, at this point in time that isn't the case and as I'm no tax expert the best advice as far as I'm concerned is still that which John Whiting provided. No disrespect Vaco, but unless you're a tax expert or happen to be in the fortunate personal situation that you make your income solely and exclusively from spreadbetting and pay no income tax, then my position at this moment in time is to take John Whiting's advice. How can I argue with the Tax Policy Director of the CIOT? I take on board the argument about the companies paying betting duty, so the govt effectively gets it's tax on trades, but HMRC is getting more and more aggressive in trying to increase it's tax take.

This is exactly why I've stated before that the only way for this issue to be buried is for someone to challenge HMRC and a definitive ruling given. To my knowledge this has never been the case, and until that happens I'm following Mr Whiting's advice.

But it would be good if someone like "oiltanker" who claims to have a letter from HMRC stating profits are tax free, to post a copy for all to see.

 

[oiltanker]

i can't believe people are still confused.

maybe people are too lazy to ring up their local tax office and ask for the Tax office spread betting specialist?

 

[stevespray]

i can't believe people are still confused.

maybe people are too lazy to ring up their local tax office and ask for the Tax office spread betting specialist?

...Not me sir

I rang my tax office and asked exactly the questions needed.

I was bounced around a little but finally put through to a senior tax inspector. I asked specific questions regarding 'full time spreadbetting'. She told me that someone in my tax area was already being taxed as a 'professional gambler' and that he used 'betting' as his trading vehicle. She couldn't go into more detail for very obvious reasons. I pressed the matter further with a few "what if" type questions but didn't really get anything more. The inspector in question did appear to apply a considerable amount of moral issue to the questions that I was asking. She bounced one back to me asking "How would you feel if you knew that the guy next door was earning £150,000 a year and not paying a penny in income tax whilst driving around in a swanky car?" I developed the conversation and she added that the IR (HMRC) have the power to look at everyone circumstances at an individual level if they feel that someone circumstances are unique or rare. I have little doubt that HMRC could deem a very successful spreadbetter as being 'rare' if it thought that it would help them.

Having said all that, I don't personally know anybody who pays income tax on spreadbet winnings and I do know quite a few profitable traders.


Steve.

 

[Pazienza]

If you are serious about this, seek advice from a competent and qualified professional.

 

[trader30]

So I think we have summarised that as long as you are "betting", then you have a pretty good case to say why you are not paying tax on your "betting" profits whether is be horses, dogs, dow or dax.

I have now started to trade futures through a new uk based spread betting company (it is currently by inivtation only, and only for large-ish clients, USD50k/GBP30k+, it is part of a much larger very well known parent company though, not some start-up cowboy). The difference is, rather than paying the underlying market price plus a spread (as per usual SB firm setup), I now get the actual futures price and pay a small commission.

So basically I can trade futures tax free and for lower costs than SB.

Yes the commissions are a bit higher than usual futures comms, but my profits are tax free!!!

Let me know if anyone is interested in speaking to them and I will put you in touch.

 

[pit pony]

So I think we have summarised that as long as you are "betting", then you have a pretty good case to say why you are not paying tax on your "betting" profits whether is be horses, dogs, dow or dax.

I have now started to trade futures through a new uk based spread betting company (it is currently by inivtation only, and only for large-ish clients, USD50k/GBP30k+, it is part of a much larger very well known parent company though, not some start-up cowboy). The difference is, rather than paying the underlying market price plus a spread (as per usual SB firm setup), I now get the actual futures price and pay a small commission.

So basically I can trade futures tax free and for lower costs than SB.

Yes the commissions are a bit higher than usual futures comms, but my profits are tax free!!!

Let me know if anyone is interested in speaking to them and I will put you in touch.

I am certainly interested if somebody new has come along, could you help me get contact please.

 

[sblondon]

Dear all,

I have read the above posts and understand the tax position is vague with respect to wins.

However, does anyone know what the income tax rules are relating to dividend adjustments? For example, if you buy and hold one of the many bluechips paying c5-7% dividends, which with the effect of leverage will be significantly higher than that, it could easily add up to some significant income.

This feels different to betting so thought maybe this is treated like standard dividend income.

Would be very interested to see what people do.

Thanks
sblondon

 

[trader30]

Hi sblondon,

Most UK SB firms pay 90% of the dividend if you are in a long position.

(they justify only paying 90% as they say they have to pay 10% withoolding tax on the underlying position they are holding to hedge your position - in reality we know it is VERY unlikely that they are actully holding that position, unless you are doing very big size or are on their "A-book" of winning clients - but this is the justification you will hear from most firms).

If you are short, you will pay 100% of the dividend.

You usually have to take these positions before the ex-div date, sometimes earlier.

Other firms may be different.

**

In regards to taxation, "betting" is tax free in the UK. The governement tax the betting firms profits.

Are you trading at the moment?