ShaunWhite wrote: ↑Thu Apr 26, 2018 12:14 am
That's right. Pro gambling used to be a very niche activity that didn't warrent the complications and paperwork. It was also a cash activity not easily tracked.
As it becomes more common, loopholes get closed, and it gets easier for hmrc to track your account activities, it's a situation I wouldn't guarantee will exist forever.
People often say that they won't because losses would be deductable, but they're only a deduction, not a refund.
Totally agree Shaun. I was in the tax industry before retiring. I wouldn't be surprised if HMRC didn't carry out a full review of betting taxes sometime, it's full of anomalies carried over from the days of shop bookmaking and earlier. If you enter a shares trade as a Contact for Differences (CforD)the profit is CGT taxable (for anyone who has not come across these instruments before it's an investment where the return is based on the difference in price of a share without the requirement for you to invest the full value of the shares, you just need to cover the liability) but if you do what is effectively a CforD with a spreadbet company there is no tax because it's betting ... it makes no sense!
HMRC have a long term general rule that if you acquire something with the aim of making a profit then you are trading and trading profits are taxable. Private cars are free of tax (I'm ignoring Road Fund Licence etc.) but if you are a car dealer then your profit when you sell cars is taxable. Why? John bought his car and drove it for 1, 2, 3 or more years before selling it but the dealer bought 100 cars with the intention of selling for a profit. Now compare your position with that of John who goes into his local booking and puts £10 on the favourite in the 3:30 at Epsom. John places a few bets a week and although he hopes for winners he will probably make a loss long term so as Shaun said, HMRC don't want to be giving him relief on his losses but you take 100's of position every day each with the intention of making a profit. Why should you be treated any different to the car dealer?
And remember HMRC can set whatever rules they want. They can pass law that says if you are a trader by their definition and make a profit then you will be taxed. They have the legislation in place now that would go at least half way! If you run a business but do not make a profit they can argue it is a business in name only and not allow you to offset your losses against your other income. This often applies after 2 consecutive years for a 'normal' business but is stretched to 5 years for a farmer
(there are arguments the taxpayer can raise in mitigation but let's keep this simple
). So John's losses on his £10 bets would not be offset in the long run, and probably not at all because law could be drafted such it is left for HMRC to determine whether you are trading or not and John would be unlikely to challenge them.
So even if all that fails HMRC can introduce legislation at any time that would allow them to tax your winnings. Take the recent changes in the Buy to Let (BTL) market. Buying and renting a house is like running a business, you rent the property for income and that incurs expenses. If the income exceeds the expenses then you pay tax at your top rate on the surplus. The tax structure of BTL properties is just about identical to any other business ... or it was! New rules will now limit how you can offset the mortgage interest (an expense) against the rent (the income). So as a business BTL has been singled out and taxed differently to other businesses.
And there is no reason why they couldn't do likewise to manipulate taxing sports betting trading and the more people that do it the more likely it will be brought to their attention. There are two considerations whether to change/introduce tax legislation ...
- 1) Will it be financially profitable for us to tax this (there is a cost in every tax collection)
2) Will it be politically positive or negative.
... and the two are not exclusive. A political positive can override a financial negative and to many to tax us naughty don't do an honest days work traders would be politically positive! Furthermore it would be so easy for them to police, force bookmakers to report any account holder that trips a limit, the traders will stand out by a mile.
It may never happen, I'm just putting the case for how and why it could happen.
Say you won a remotely significant amount from betting, what does that money count as? Is it capital gains or something like that because it's akin to an investment, or does it count as straight up income? Recently been poking around trying to sort out my finances and figuring out exactly what money I have, and it's piqued my interest So I was hoping someone here will know and be able to tell me 
