This isn’t tax avoidance, damnit!

The Treasury will discuss the tax exemption of spread betting after peers including the Archbishop of Canterbury raised concerned about “extraordinary tax avoidance” on the trades.

Lord Newby, the Treasury spokesman in the House of Lords, said he agreed ministers “ought to look” at the apparent “loophole” that allows spread betters to avoid income tax, capital gains tax and stamp duty on transactions.

The concern was raised by Lord Eatwell during the second day of the debate on the Financial Services (Banking Reform) Bill. The Labour peer said spread betting “is a really extraordinary form of tax avoidance within the financial services industry.”

Betting is a private wager and is not subject to income or capital gains tax. This is true of horse racing, footie, and, yes, betting on financial markets.

Because it’s betting, d’ye see?

13 thoughts on “This isn’t tax avoidance, damnit!”

  1. “The concern was raised by Lord Eatwell during the second day of the debate on the Financial Services (Banking Reform) Bill. ”

    He really got to grips with the matter at hand than didn’t he!

  2. Don’t you pay tax on the stake, otherwise you pay on the winnings?

    You have to admire the giant dollop of chutzpah when a church man talks about tax avoidance.

  3. Runcie, they changed betting duty some years ago (something I claim some credit for, having helped set up one of the first bookies in Gibraltar). Nowadays:

    a) it’s only charged on the bookie’s gross profits, not on the gross stakes, so the tax base is much smaller; and

    b) there’s a special low rate of 3% for financial services bets, rather than 15% for the geegees.

  4. Although I *believe* that if you have spread betting as your main source of income, HMRC is able to deem it to be your profession and tax you on it. So I don’t really know wtf ABC is on about here.

    [I seem to recall the reason they don’t usually tax it under Schedule D is because they’d then have to give relief for your losses and, given that most punters lose overall, it’s simply not worth the hassle. Also, betting is felt to be ‘icky’ and the sort of thing a righteous country like the UK simply doesn’t tax.

    I’m sure a tax expert will come put me straight.]

  5. The bigger reason why you don’t tax betting winnings is that (unlike capital gains) the winnings are mostly balanced by losses – apart from the bookies’ cut, which is taxable.

    If you tax the winnings you really ought to give relief for the losses, so your net tax take won’t be very much.

  6. Plus of course the fact that if they were to tax the gains/income, they’d be duty bound to allow relief for the losses – not something I believe they typically regard as an attractive prospect. (Possibly also a streak of latent puritanism about legitimising gambling by giving it fiscal recognition in such a way?)

  7. Just seen Christie’s post above (damn you ie’s crappy refresh rates) and can gladly confirm as a tax expert that he’s bang on the money in every respect. (as my post said. Great minds think alike; that’s why so many people vote on the X Factor winner).

  8. Is it possible to reach the dizzy heights of peerage without knowing that a contract for gambling is unenforceable in law? I can understand the AB of C pretending he didn’t know, fair enough.

    So if they know its a load of old toot, why have meetings? Even in the modern world they don’t get paid for just meetings.

    Then Milord’s title gave it away.

    Need to come up to London to see some pals, or take in a show? Book a half-hour meeting at the appropriate time and then off to Claridges for a slap up nosh, paid for by the common weal!

  9. I think Tim is being a little pendantic – sure it isn’t tax avoidance but neither is the archdruid really claiming that, he’s using the wrong word for something that is not currently taxable that he would like to be taxable.

    When the church starts paying tax I will start listening to its opinions on taxation, not before.

  10. My understanding of the tax situation (from talking to financial traders) is that HMRC treats trading profits and betting profits differently: trading profits are taxed as either capital gains or income, the latter if you’re deemed to be trading for a living. But betting profits are untaxed.

    If that’s right, as HMRC and Lord Newby seem to say, then the situation is anomalous, since one can execute essentially the same trade either as a purchase or as a contract for difference. Or if it’s wrong, as Christie Malry believes, I’d like to know so that I can mention it to a couple of people who would be directly affected.

  11. What really needs reform is the notion that some fucking silly sky pilot should have any input into the legislative process beyond writing to his MP.

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