Q. What is the likelihood of spread betting becoming taxable?
A: In my view, it is very unlikely that spread betting will ever become taxable. The reason is very simple – more money is lost than is won and if the gains were to be taxable the losses would be tax-deductable.
An industry spokesperson had this to say as an insider -:
Spread betting companies are treated like other bookmakers by the UK Inland Revenue, and so pay corporate tax. A betting tax, which levied 9% of winnings on punters, was abolished in 2001 as part of a successful UK government effort to draw the sports bookmakers back from overseas. Most spread betting firms are confident this situation is not going to change any time soon. “The current UK government has been very encouraging of gambling,” says one market analyst. “They shifted the tax on to the bookmakers and the higher volumes made everyone happy. They are more likely to raise the tax on bookmakers to increase revenue than shift back (to a tax on winnings).”
When CGT was at 40% nobody really thought that spread betting would become a taxable instrument so with the current level at 18% I feel that it has become even less likely.
The stamp duty angle (0.5%) is also unlikely to be attacked as this would impact CFDs which are a huge revenue earner for the UK (and the government takes a hefty slice in corporation tax).
On another point if spread betting became taxable then the spread betting companies would then dispute the gaming duty levy which is currently at 3% of all client loses. Given that around 80% of clients lose money the government would then lose 24% (80×3%) of definite taxable revenue (as they take it straight from the spread betting companies) against a possible 36% (20*18%) if every single winner declared (of course many clients are foreign) and of course most people have some 6k a year of tax free CGT as well. But they would then lose out on the revenue of the 80% losing clients which could be offset against other CGT liabilities.
Unlikely to happen…is the short answer
