Spread betting tax situation
- Thread starter CityTrader
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You can give as much money to 'professional' advisers as you like (and they will be happy to take your money) but in my opinion you won't get the answer you're looking for. As far as I can make out the only way for this issue to get solved is by having more case law.
I note that in the IG Index prospectus there is a similar issue to the UK about capital gains tax on spread betting under Australian Law. The way I think they have decided to go (IG and the Oz authorities) is to let case law decide.
I note that in the IG Index prospectus there is a similar issue to the UK about capital gains tax on spread betting under Australian Law. The way I think they have decided to go (IG and the Oz authorities) is to let case law decide.
stevespray
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This subject has been covered many times already and no definitive answer is ever reached. This is why it’s called a ‘grey area’. I’ve mentioned my own angle several times before on the various different threads but will mention my findings again.
I have spoken at length with several senior tax inspectors at my local tax office in an informal (off the record) manner.
The most important point which I feel they make is this : It is possible to be classified as a ‘Professional Gambler’. Whilst this title is a rare classification it does exist and two senior inspectors have informed me that they know of at least one person living in my tax area who carries that title.
On probing further I asked how they deemed someone to be a ‘Professional Gambler’. It would seem that there are no set guidelines except common sense and subjective opinion on the part of the Inland Revenue. On of the main factors they test for is what is termed ‘subsistence’. Subsistence allowance is an assessment of how much money a person (or persons in the case of a family) need to survive on. In other words, everybody needs a regular income and the IR may assess where this ‘income’ comes from. If it comes directly from ‘betting’ or ‘gambling’ then you could be under the spotlight.
Apparently the IR monitor peoples tax returns. Once you start paying tax you can not suddenly stop without arousing considerable suspicion and there lies the problem. People who just stop paying tax either through PAYE or through Self Assessment will get detected. Apparently they even detect people who have been big earners who suddenly start paying less. On of the inspectors told me that people might get away with not paying tax for a year or two but she doubted that they would avoid detection for any length of time longer than that especially if they had been regular contributors before that.
Of course many people have legitimate reasons for suddenly paying less tax – Retirement, redundancy, long term illness, pregnancy and ‘Going back to school’ are all things which people do. The problem for the Spreadbetting Trader is that they do not fall into that category. You’ll be asked to fill out forms explaining what you are doing and why you aren’t paying any Income Tax. At this point you’ll have little choice but explain what you are doing. One of the inspectors did have a limited knowledge of spreadbetting. I asked what would happen if they asked someone about their ‘income situation’ and that person admitted that they spreadbet for a living. He said that it would almost certainly lead to a more in depth investigation.
I feel that the above would satisfy many peoples situations if they just gave up work and traded fulltime using spreadbetting.
There are obviously exceptions and potential ‘loop holes’.
The best one I would suggest is having two jobs – Another ‘job’ as well as spreadbetting. In this situation you would be able to prove you had income for subsistence as well as being able to claim that your spreadbetting activities were pure ‘amateur speculation’.
Another way around it would be to claim that you were living off a capital sum. Obviously you need to be able to show that you have a considerable wedge stacked away to get away with this one.
Also you can claim that you are retired. Again, people who retire (especially people who retire early) need to be able to show that they have pensions which cover subsistence.
Hope this helps,
Steve.
I have spoken at length with several senior tax inspectors at my local tax office in an informal (off the record) manner.
The most important point which I feel they make is this : It is possible to be classified as a ‘Professional Gambler’. Whilst this title is a rare classification it does exist and two senior inspectors have informed me that they know of at least one person living in my tax area who carries that title.
On probing further I asked how they deemed someone to be a ‘Professional Gambler’. It would seem that there are no set guidelines except common sense and subjective opinion on the part of the Inland Revenue. On of the main factors they test for is what is termed ‘subsistence’. Subsistence allowance is an assessment of how much money a person (or persons in the case of a family) need to survive on. In other words, everybody needs a regular income and the IR may assess where this ‘income’ comes from. If it comes directly from ‘betting’ or ‘gambling’ then you could be under the spotlight.
Apparently the IR monitor peoples tax returns. Once you start paying tax you can not suddenly stop without arousing considerable suspicion and there lies the problem. People who just stop paying tax either through PAYE or through Self Assessment will get detected. Apparently they even detect people who have been big earners who suddenly start paying less. On of the inspectors told me that people might get away with not paying tax for a year or two but she doubted that they would avoid detection for any length of time longer than that especially if they had been regular contributors before that.
Of course many people have legitimate reasons for suddenly paying less tax – Retirement, redundancy, long term illness, pregnancy and ‘Going back to school’ are all things which people do. The problem for the Spreadbetting Trader is that they do not fall into that category. You’ll be asked to fill out forms explaining what you are doing and why you aren’t paying any Income Tax. At this point you’ll have little choice but explain what you are doing. One of the inspectors did have a limited knowledge of spreadbetting. I asked what would happen if they asked someone about their ‘income situation’ and that person admitted that they spreadbet for a living. He said that it would almost certainly lead to a more in depth investigation.
I feel that the above would satisfy many peoples situations if they just gave up work and traded fulltime using spreadbetting.
There are obviously exceptions and potential ‘loop holes’.
The best one I would suggest is having two jobs – Another ‘job’ as well as spreadbetting. In this situation you would be able to prove you had income for subsistence as well as being able to claim that your spreadbetting activities were pure ‘amateur speculation’.
Another way around it would be to claim that you were living off a capital sum. Obviously you need to be able to show that you have a considerable wedge stacked away to get away with this one.
Also you can claim that you are retired. Again, people who retire (especially people who retire early) need to be able to show that they have pensions which cover subsistence.
Hope this helps,
Steve.
CityTrader
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I still say... name me one individual who pays tax on SB winnings....
Let me give you the definitive take on this issue..if you wish to put it to sleep with certainty..you the individual approach your tax office and give chapter and verse on your specific situation and ask them to give you a ruling..until you do that you are simply side stepping around the issue (probably hoping that someone will give you the answer you would most like to hear) 
"every professional spread better should receive the same treatment, so there must be some ruling, case law, etc that settles the issue."...wrong !
Time now so I will explain why you are wrong... case law is dependant on facts for a subsequent application to reach the same ruling as laid down by the precedent..don't think we'll get much dissention on that point...now it might be obvious by now that the way , or maybe I should say the circumstances of each "professional spreadbetter" are not necessarily the same and there is the rub ...a precedent that was applicable to one case would not necessarily apply to others if their circumstances were factually different...all of this can be overcome by each individual through the method I suggested earlier..costs you nothing to do except of course let's be 'honest'...most people don't wish to go down that road in case they get an answer they don't want ..
Time now so I will explain why you are wrong... case law is dependant on facts for a subsequent application to reach the same ruling as laid down by the precedent..don't think we'll get much dissention on that point...now it might be obvious by now that the way , or maybe I should say the circumstances of each "professional spreadbetter" are not necessarily the same and there is the rub ...a precedent that was applicable to one case would not necessarily apply to others if their circumstances were factually different...all of this can be overcome by each individual through the method I suggested earlier..costs you nothing to do except of course let's be 'honest'...most people don't wish to go down that road in case they get an answer they don't want
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agreed, but the situation i was thinking of would be where you have 2,3,4 etc, professional spreadbetters making 40K,50K,etc a year . it's their profession, their only source of income.i.e. no other complicating tax matters - professional trading, purely and simply.
in a situation like this i'd expect the tax treatment to be the same for everyone. a "blanket" treatment. this is the question i'm trying to get answered. i understand that evryone has a unique standing in the eyes of the IR , but there must be hundreds of professional betters who fit into the scenario i just described.
in a situation like this i'd expect the tax treatment to be the same for everyone. a "blanket" treatment. this is the question i'm trying to get answered. i understand that evryone has a unique standing in the eyes of the IR , but there must be hundreds of professional betters who fit into the scenario i just described.
stevespray
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I think Chump has hit the nail on the head. The only reason people choose not to go to their tax office is because they fear the outcome.
As someone already mentioned, this issue probably only effects a very small number of people and this is another reason why it is so hard to get a definitive answer. Also, if you think about it logically, why would someone spreadbet if they were likely to be taxed on their winnings – it makes no sense, you would move over to direct access and save a small fortune on spreads and overall trading costs. The chances are that you would not be spreadbetting as soon as you realised that you were going to be taxed on it regardless.
I notice in one of the links that the advice from someone at IG Group might be sought. Whilst it is often a good idea to obtain several different view points it is worth mentioning that IG may paint a picture which suites their own purpose. They do after all provide a spreadbetting service and, at one point, were reputed to have ‘donated’ £5m to the Conservative Party.
Steve.
As someone already mentioned, this issue probably only effects a very small number of people and this is another reason why it is so hard to get a definitive answer. Also, if you think about it logically, why would someone spreadbet if they were likely to be taxed on their winnings – it makes no sense, you would move over to direct access and save a small fortune on spreads and overall trading costs. The chances are that you would not be spreadbetting as soon as you realised that you were going to be taxed on it regardless.
I notice in one of the links that the advice from someone at IG Group might be sought. Whilst it is often a good idea to obtain several different view points it is worth mentioning that IG may paint a picture which suites their own purpose. They do after all provide a spreadbetting service and, at one point, were reputed to have ‘donated’ £5m to the Conservative Party.
Steve.
You're really answering your own question ..blanket treatment depending on the circumstances of each trader being tthe same...no argument at all ,but just how are you going to go about ascertaining that this prerequisite is in place ? I think you are giving yourself problems in resolving this issue that you don't actually need ....again , I will say the bottomline no matter what you are told and by whom is that the tax office ruling is the only sure way of resolving this issue and even then that ruling will only apply for as long as the circumstances it is based on remain unchanged