Tax free or not? Is the debate over?

Pazienza

Pazienza

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I found this on the ibetfinancials website:


Frequently Asked Questions

I have heard that spread betting winnings are not tax free if they make up
the majority of your income?

Tax Counsel was very clear on this point. Even if your only income is from
spread bet winnings, this is not taxable.

In the past, people have said that SB companies have been somewhat equivocal on this point. The debate has been basically that yes SB winnings are tax free, but what if they are your only income?

I'm interested because this is practically on the front page of the Kyte Group's website.

Any thoughts?

http://www.kytegroup.com/support/pdf/ibet_faqs.pdf
 
This debate has been here before and in my view it is tax free. If not then one year someone who makes a profit could then offset any losses in future as a precedent would have been set. I seem to remember that there were certain tax offices who viewed it differently to others but that just means one tax office is wrong as the law applies to all. What has surprised me is just how often tax offices don't know tax law and I know of people who have been to court over this and won their case when the local tax office tried to take money that they were not entitled to take.


Paul
 
It's pretty unequivocal from HMIRC that spread betting is not taxable, even if sole income, since it is not considered to be by way of trade.

The grey area is if you do something else associated with spread betting by way of trade - like selling trading tips/systems or coaching - when it's possible that your spread betting activities are considered to be part of your overall business and thus taxable.

jon
 
Look at it this way, if it was taxable you could claim back losses, not gonna happen.

I thought the general view was it's tax free but you'll make more going DMA and getting an accountant if you're any good.
 
Hotch said:
Look at it this way, if it was taxable you could claim back losses, not gonna happen.

I thought the general view was it's tax free but you'll make more going DMA and getting an accountant if you're any good.
Click to expand...


Hotch

People don't lose though, do they. Surely not :)

Jon
 
counter_violent said:
Not this again ffs
Click to expand...

Sorry CV, I thought it might be interesting because as far as I'm aware it's the first time a spread bet company has publicly stated that they have obtained a professional opinion that it's tax free even if it's your only source of income.

Are you aware of any others that have done this?
 
Pazienza said:
Sorry CV, I thought it might be interesting because as far as I'm aware it's the first time a spread bet company has publicly stated that they have obtained a professional opinion that it's tax free even if it's your only source of income.

Are you aware of any others that have done this?
Click to expand...

No, I suppose thats a development. :)
 
Pazienza said:
Sorry CV, I thought it might be interesting because as far as I'm aware it's the first time a spread bet company has publicly stated that they have obtained a professional opinion that it's tax free even if it's your only source of income.

Are you aware of any others that have done this?
Click to expand...


PC from CMC markets was asked this on his q&a trad2win thread. I think he then consulted his in house lawyer and put a reply on his thread.

I should dig up that reply, but i cant be bothered at this time of night.
From memory PC said something along the lines of .. if what you are doing is gambling then SB profits are are not taxable.

So when is Spread betting not gambling?

Im not sure, but i can think of a few grey areas:

1. Arbitrage, say you are exploiting pricing differences across 2 spread bet firms and pretty much guaranteeing a profit for yourself. This used to possible in the early days of internet spread betting.. not so easy anymore.

2. Market making. Paz is quoting some marketing material from Kyte. I assume they have a few profitable ex prop firm traders who are using their spread betting offering via the DMA wrapper. Now if the trader is using a DMA wrapper for Market Making style of trading (eg putting out buy and sell orders very close together at the same time) and the majority of his profits are from capturing the bid/ask spread, then that might not be considered gambling by HMRC, even though a spread bet wrapper is used. (I may be completely wrong, HMRC may have no problem with this at all).


But for the majority of spread bettors, even full time 'sole income' ones, who are just making directional punts, yeah, not taxable.
 
for what it is worth at capital spreads we take the view that

if spread betting is your only income then it might be considered to be 'trading' and therefore taxable. But we have yet to hear of a single instance where the tax man has actually won a case.

There have been a few.

At the moment there is (aparently) a big case where a day trader working out of an 'trading arcade' is being persued on the basis that as his only normal revenue is day trading then therefore spread betting is just another form of his actual income. This is just about the only possible win situation for the tax man but we understand that even here the case is going the way of the trader (and this is a pretty rare combination of circumstances). Even dealers working in the City (because they are paid a 'salary' no matter how well they actually do) trade tax free on Spread Betting.

for the vast majority Spread Betting is tax free (no matter how much you make) BUT as with everything there is a quid pro quo.. and this is that any losses are not able to be offset against tax liabilities.

Simon
 
Thanks for stopping by and giving that opinion. That was really why I started the thread, because I had never seen an SB company go as far as ibetfinancials. I think you've actually gone further there than most companies do on their websites and so on.

capitalspreads said:
for what it is worth at capital spreads we take the view that

if spread betting is your only income then it might be considered to be 'trading' and therefore taxable. But we have yet to hear of a single instance where the tax man has actually won a case.

There have been a few.

At the moment there is (aparently) a big case where a day trader working out of an 'trading arcade' is being persued on the basis that as his only normal revenue is day trading then therefore spread betting is just another form of his actual income. This is just about the only possible win situation for the tax man but we understand that even here the case is going the way of the trader (and this is a pretty rare combination of circumstances). Even dealers working in the City (because they are paid a 'salary' no matter how well they actually do) trade tax free on Spread Betting.

for the vast majority Spread Betting is tax free (no matter how much you make) BUT as with everything there is a quid pro quo.. and this is that any losses are not able to be offset against tax liabilities.

Simon
Click to expand...
 
i cannot really comment on the ibetfinancials legal opinion as (i understand) the whole point of their platform is that the trades go directly into the market (plus commission). I find it difficult to see how a trade that is acknowledged to be DMA can be considered 'a bet'. But I am not a lawyer and so will defer to their better legal knowledge

the point about Spread Betting (I have always believed) was that the trade are nominally made with the 'market maker' (bookie) as counterparty with the possibility that the market maker might then 'go to market' to hedge.

without this 'uncertainty' i struggle to see how it can be called a bet.

Simon
 
capitalspreads said:
i cannot really comment on the ibetfinancials legal opinion as (i understand) the whole point of their platform is that the trades go directly into the market (plus commission). I find it difficult to see how a trade that is acknowledged to be DMA can be considered 'a bet'. But I am not a lawyer and so will defer to their better legal knowledge

the point about Spread Betting (I have always believed) was that the trade are nominally made with the 'market maker' (bookie) as counterparty with the possibility that the market maker might then 'go to market' to hedge.

without this 'uncertainty' i struggle to see how it can be called a bet.

Simon
Click to expand...

Funnily enough, that's one of the things I've never understood about Prospreads.
 
Ross Spur said:
Funnily enough, that's one of the things I've never understood about Prospreads.
Click to expand...

Ross

Prospreads Quote "DMA Functionality" which I take to mean that they give you the underlying market price and in most cases choose to fully hedge. And the big difference is that you receive a price that is not the market price (spread added), so it is not quite DMA but the original price is the market price. This is different from IBET where you are DMA plus comm?
 
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