Uk tax implications for currency traders
I spoke to a potential new client yesterday, who makes 'a bit' of money doing forex trades in his own name. He does not put it through the business and claimed that he did not pay tax on it as it was classed as 'gambling'. I suppose materiality comes in to it, but surely, if he is making money on it, it is like buying and selling shares, and therefore taxable. Otherwise for futures trading or margined forex trading Capital Gains will be incurred for infrequent trading.
Income tax will be charged for frequent trading if they spend a couple of days a week upwards. I don't think HMRC regard foreign exchange trading is gambling even though it is otherwise all thiose brokers in London would pay even less tax than they allegedly do- the clue might be in the word 'trading'.
Maybe that's an urban myth, but I have one such client and that's how he discloses gains and losses. Salt v Chamberlain said individuals trading in shares pay CGT and one would think the same principle applied to forex trading. Unless things have changed since then.
Salyt v Chamberlain was pre big bang when only licensed dealers could trade in shares as a principal and so be liable to income tax. All others, even stockbrokers trading in a personal capacity, were within CGT and not income tax. The rules are different for companies, it is much more likely that they will be regarded as trading, in the old terminology, as a principal.
Betting on the movement in an index is exempt, as is betting on a horse etc, but in currency trading and the like you are acquiring and disposing of obligations, as they are themselves capable of being bought and sold it takes you into the field of CGT or IT.
Betting on the movement without buying the currency is gambling and is tax free. Lets put this matter to bed once and for all from a tax expert who's dealt directly with HMRC on this particular subject.
Spread betting is not classed as a 'trade' from HMRC's perspective therefore any profits made from spread betting are not subject to CGT or Stamp Duty in the UK.
The principles of Down v Compston [] 21TC60 and Burdge v Pyne [] 45TC see BIM apply equally to spread betting. Spread betting is treated in the same way as pure gambling.
I am intending to start trading in FOREX for a living. I assumed
As StartUpAcc correctly stated, if an individual trader 'bets' on the 'movement' of a currency i. Unlike buying shares in a company, any gains you make would be taxable under CGT rules. This is because you're not buying shares in the hope that they fall in value obviously!
You can indeed 'bet' on the 'movement' of shares as well and that too would be free from UK tax. So to recap - If you're 'betting' that the price of a financial instrument whether it be Currency, Metals, Shares, Commodities, Indices, Bonds, Interest Rates, Options etc will go up or down then any profitable outcome of that bet will not be subject to UK tax, period.
This matter had already been fast asleep for 3 years before you decided to wake it up just to put it to bed. The whole point of waking the matter up again was purely so that 'current' readers not the ones from 3 years ago could hear it directly from the horse's mouth, who has a great deal of experience in this area of tax, as most if not all of the previous responses above were clearly from non-tax experts who weren't able to justify their facts properly with anything concrete or any kind of proper case law.
Us tax experts we thrive on facts, not guesses. I'd therefore hate to see 'current' readers still confused over whether spread betting was taxable or not.
So finally 'current' readers can sleep peacefully tonight knowing the correct facts. Hope you have a great evening too! Some of us also have lots of experience in this area including gettting HMRC clearance for schemes and ER relief involving futures, spread, options,CFD etc.. I'm sure you will agree that most comments across most forums can't necessarily be trusted at face value purely because most users of forums are non-experts of the subject matter in question.
Don't get me wrong, I think forums are a fantastic way to get a load of questions out in the open. When I read your comments, and indeed others, about whether spread betting is taxable or not, it doesn't fill me with absolute 'by the book' confidence that those are truly the facts purely because they have no solid backing behind it i. Anyone can lay down their thoughts in a forum but can they back it up with solid evidence?
That's the big question I think you've missed Not sure how you've all of a sudden become involved in this however I think it's fantastic that you've taken an interest in our recent discussion.
What tax implications if any are there if I started making
Believe it or not I thrive on comments like yours because it shows me time and time again how others get so frustrated so quickly over such minor issues; we were merely having a calm discussion before you stepped in and blew it all up. Unfortunately in my profession Accounting and Tax we can't afford to throw our toys out of the cot when realising we don't know the facts about something; instead we stay calm and learn those facts.
Realistically the whole purpose of this website is so that knowledgeable folks can just come in and answer things 'factually' in case there's still any doubt out there. Clearly this whole issue of me quoting facts about spread betting has upset you deeply, otherwise you wouldn't have responded to it in the way that you did, so I do apologise for that sincerely.
In no way did I imagine that my initial comments on spread betting would lead to this. Hopefully it can now lay to rest and we can all forget about it and enjoy the rest of our day.
I haven't bothered to read beyond 'recent discussion'. I might have bothered had you used the return button on your keyboard and stuck some paragraphs in between on that fluff. There is a thing called 'forum etiquette'. It is forum etiquette not to resurrect threads that are this old.
It would have been better for you to start a new thread, and, if you felt the need, to reference this old thread. Resurrecting old threads, dismissing previous answers, all whilst referring to yourself as an expert and that your answer is 'from the horses mouth' is just going to get people's backs up.
Resources Podcasts About AccountingWEB Advertise on AccountingWEB Terms of use Privacy policy Contact us Got a question? Latest Any Answers MVL. Correction to submitted Confirmation Statement. The other question, is it income tax or capital gains?? Sounds like trading and if so income tax not CGT. I thought that was the big debate - income tax or CGT, not that is was gambling. Salt V Chamberlain Agree with Andy. The Big Bang Salyt v Chamberlain was pre big bang when only licensed dealers could trade in shares as a principal and so be liable to income tax.
Depends if physically buying currency IG Index for example advertise that taking out spread betting on forex is tax free: Spread Betting see - http: No tax - betting. Hi Tim The whole point of waking the matter up again was purely so that 'current' readers not the ones from 3 years ago could hear it directly from the horse's mouth, who has a great deal of experience in this area of tax, as most if not all of the previous responses above were clearly from non-tax experts who weren't able to justify their facts properly with anything concrete or any kind of proper case law.
Forex Automatic Profits: Tax Implications of Trading the Forex
I said this 4 years ago in one line! Thanks MJShort I'm sure you will agree that most comments across most forums can't necessarily be trusted at face value purely because most users of forums are non-experts of the subject matter in question. Thanks 'Mrme89' Not sure how you've all of a sudden become involved in this however I think it's fantastic that you've taken an interest in our recent discussion. Despite what you say, this is not a recent discussion.
Please login or register to join the discussion. Penalty for late filing if no tax return issued?
TOGC on transfer of part of a business 20th Jun Most read this week 15th Jun QBO and Xero raise stakes in cloud numbers game. How innovation fuels Tayabali Tomlin. We are life changers.
Crunch gears up for growth.