Self-Employed Sports Traders

[foxwood]

Legal precedent that gambling profits are not taxable as income goes back to the 1920's and has been re-affirmed multiple times - see https://www.taxationweb.co.uk/tax-artic ... nings.html for a recent case that puts a bit more spin on the "organized" aspect for professionals.

Backing / laying are gambles. What is called "trading" with sports betting is not actually a trade in any goods or chattels but rather two bets that comprise (as per precedent) "an irrational agreement that one person should pay another person on the happening of an event" - bets.

It would probably need primary legislation in terms of the Budget rather than actually being open to HMRC - they have tried before and lost.

It'll probably come in some form of taxation before too long - probably with a lower band entry point eg more than £1k nett profit in a year - same practical threshold they tend to apply for ebay sellers etc. Probably come under unearned income (since is not earnings ).

That should let all the mugs bet and the pros get taxed - higher rate commissions would probably have to go down then to compensate the taxes and keep pros trading otherwise the whole system would implode as smaller pros left the game since any level of tax may leave them with insufficient profit !

And you won't be able to hide since the bookies /exchanges will have to tell HMRC - just like dividends / interest details etc which is provided to them now.

[firlandsfarm]

foxwood we are just about in agreement, are you in the tax world?

Legal precedent that gambling profits are not taxable as income goes back to the 1920's and has been re-affirmed multiple times - see https://www.taxationweb.co.uk/tax-artic ... nings.html for a recent case that puts a bit more spin on the "organized" aspect for professionals.
now.

Yes the precedent is true but all precedents are based on the law of the land as it stood at the time, if the law changes the precedent is challengable.

Backing / laying are gambles. What is called "trading" with sports betting is not actually a trade in any goods or chattels but rather two bets that comprise (as per precedent) "an irrational agreement that one person should pay another person on the happening of an event" - bets.

Yes they are so why is a bookmaker liable to tax on the profit he makes from the bets he lays? And trading does not have to be goods or chattels … city traders?

It would probably need primary legislation in terms of the Budget rather than actually being open to HMRC - they have tried before and lost..

Only if they were finding difficulty going the 'definition of trading' route the way we bet today is so different to when the precedent was set … I would like to know more about the more recent challenges. But I can't see an MP turning down the chance to knock us "despicable professionals" who make a profit from the little man in the street.

It'll probably come in some form of taxation before too long - probably with a lower band entry point eg more than £1k nett profit in a year - same practical threshold they tend to apply for ebay sellers etc. Probably come under unearned income (since is not earnings ).

Totally agree … when it's big enough they will go for it.

That should let all the mugs bet and the pros get taxed - higher rate commissions would probably have to go down then to compensate the taxes and keep pros trading otherwise the whole system would implode as smaller pros left the game since any level of tax may leave them with insufficient profit !

And you won't be able to hide since the bookies /exchanges will have to tell HMRC - just like dividends / interest details etc which is provided to them now.

Yep in fact the bookies would not be too unhappy because any threshold will encourage backers to leave the exchanges and spread their bets around multiple bookmakers but those who trade would have no choice … all on one exchange means easy to monitor.

[wearthefoxhat]

Interesting read.

I think one issue is if HMRC look at this area and make a minimum profit allowance applicable to a self employed sports trader, the element of paying national insurance as well, rears it's ugly head and the extra costs of setting up an online tax portal. (new requirements).

I hope they swerve poker players though...

[PDC]

Think of this Derek … if you are an on-course bookmaker you pay tax on your profits so why should the Betfair based bookmaker not pay tax? They are the same businesses just different locations.

They are not both the same, I am pretty sure there was a case where this was established. One of the points I remember reading was that 'bookmakers' on exchanges were not actually bookmakers as they don't hold the funds, the funds are held by Betfair which was a significant distinction between an on-course/shop/internet bookmaker and someone on Betfair. So although similar they were deemed not to be the same and therefore were not treated the same.

Your ebay trader holds the goods e.g. the TV they are selling much like the oncourse bookmaker who holds the notes and coins and the ebay trader is responsible for distributing the goods (posting the TV) like the oncourse bookmaker is responsible for giving out winnings. The Betfair based bookmaker never holds the goods (money) and has no responsibility for distributing the goods or collecting any commissions, charges or taxes.

Although similar they are fundamentally different. Have a search of the internet I am sure you will find the rulings about it all.

[Derek27]

Think of this Derek … if you are an on-course bookmaker you pay tax on your profits so why should the Betfair based bookmaker not pay tax? They are the same businesses just different locations.

They are not both the same, I am pretty sure there was a case where this was established. One of the points I remember reading was that 'bookmakers' on exchanges were not actually bookmakers as they don't hold the funds, the funds are held by Betfair which was a significant distinction between an on-course/shop/internet bookmaker and someone on Betfair. So although similar they were deemed not to be the same and therefore were not treated the same.

Your ebay trader holds the goods e.g. the TV they are selling much like the oncourse bookmaker who holds the notes and coins and the ebay trader is responsible for distributing the goods (posting the TV) like the oncourse bookmaker is responsible for giving out winnings. The Betfair based bookmaker never holds the goods (money) and has no responsibility for distributing the goods or collecting any commissions, charges or taxes.

Although similar they are fundamentally different. Have a search of the internet I am sure you will find the rulings about it all.

By 'Betfair based bookmaker' I think he's referring to Betfair customersfrom HMRC's viewpoint.

[firlandsfarm]

... 'bookmakers' on exchanges were not actually bookmakers as they don't hold the funds, the funds are held by Betfair which was a significant distinction between an on-course/shop/internet bookmaker and someone on Betfair.

...Your ebay trader holds the goods e.g. the TV they are selling much like the oncourse bookmaker who holds the notes and coins and the ebay trader is responsible for distributing the goods (posting the TV) like the oncourse bookmaker is responsible for giving out winnings. The Betfair based bookmaker never holds the goods (money) and has no responsibility for distributing the goods or collecting any commissions, charges or taxes.

Amazon provide a service where they will keep your goods for you. You get your supplies delivered directly to Amazon, they store them and when you make your sale on Amazon they will collect the money, package and dispatch your goods and accept any returns if made. Does that mean that if you trade through this service using this Amazon service you will not pay tax on your profits because you are not collecting the money nor holding/processing/dispatching the goods? Somehow I doubt it.

[spreadbetting]

For Amazon you still own the goods they're simply storing and providing a platform to sell them as well as collecting monies on your behalf. The argument the bookies came out with to shut down Betfair was that punters laying bets were acting as bookmakers and therefore needed a bookmakers licence. The powers that be decided that was incorrect and Betfair were the bookmaker, regardless of the punter vs punter tagline your bets have always been placed against Betfair not the opposing punter. I'm simply betting against the bookmaker Betfair no one else, because their liquidity is dependant on others makes no difference.

[firlandsfarm]

For Amazon you still own the goods they're simply storing and providing a platform to sell them as well as collecting monies on your behalf. The argument the bookies came out with to shut down Betfair was that punters laying bets were acting as bookmakers and therefore needed a bookmakers licence. The powers that be decided that was incorrect and Betfair were the bookmaker, regardless of the punter vs punter tagline your bets have always been placed against Betfair not the opposing punter. I'm simply betting against the bookmaker Betfair no one else, because their liquidity is dependant on others makes no difference.

Look we are getting into semantic details here … all I'm saying is that in my time as a tax consultant I have seen the Inland Revenue as it was then tax things that were thought to be tax free forever. They can tax anything they want if they have the desire to do so and quoting precedent won't get you anywhere because they have it in their power to change the law in their favour. If I was working for HMRC I think I could make a very good case now because the market has changed so much over the last 5 years … FFS we even call it trading! It is probably the only legal trading that is tax free and it's trading in an area that meets with PC disapproval so they would have no problems with the general public. For those reasons it sticks out like a sore thumb and would be an easy target to shoot down. We may get away with it for years, maybe for ever, I hope we do because most of my career was spent reducing tax bills and looking for tax free ways to do things. My accountant's initial reaction when I told him what I was doing was that he expected that it would be deemed trading for profit and I had to put him right.

And I would be surprised if Betfair agreed they are the bookmakers (Exchange bets). I would expect them to plead the facebook defence of "we are only the platform, not the supplier".

[PDC]

For Amazon you still own the goods they're simply storing and providing a platform to sell them as well as collecting monies on your behalf. The argument the bookies came out with to shut down Betfair was that punters laying bets were acting as bookmakers and therefore needed a bookmakers licence. The powers that be decided that was incorrect and Betfair were the bookmaker, regardless of the punter vs punter tagline your bets have always been placed against Betfair not the opposing punter. I'm simply betting against the bookmaker Betfair no one else, because their liquidity is dependant on others makes no difference.

+1

I will try and find some of the information but the old timers like SB may have a better idea of where to look.

And I would be surprised if Betfair agreed they are the bookmakers (Exchange bets). I would expect them to plead the facebook defence of "we are only the platform, not the supplier".

If Betfair had tried to plead the Facebook case they would have gone bust over night. It was in Betfair's interested to be counted as the bookmaker and not their customers, it was the bookies that wanted the Customers to be classed as bookmakers as they knew that would mean Betfair would have been no more. The exact opposite of the Facebook argument.

Many great legal minds would have looked at it all back in the early Betfair days and the present shows that they came to conclusion that Betfair were the bookmaker and the people using Betfair were just placing bets against Betfair the same as they do with William Hill etc.

You say things have changed a lot in the last 5 years but it hasn't really, the fundamentals are all the same today on Betfair as they were when they first started. There has been tinkering around the edges but the basic principle of backing and laying have not changed.

[greenmark]

At the risk of upsetting a lot of people.....but it is an honest enquiry.

If you trade on the exchange and because you've earned more than the tax threshold, why would you complain.
Everyone else has to pay tax on income. Until you hit 11k or whatever, you're not taxable.
I guess the question would be would about PC. Betfair would be creaming PC off (paying tax on that) and if a trader still manages to break the tax threshold then fair enough. You've earned 11k pay your tax/ni.
"Hides behind sofa in anticipation of trader rage".

[Derek27]

No need to hide behind the sofa, it's a fair question. Nobody is actually complaining about being taxed because it hasn't happened (although whether people would if it happened is another matter). The thread's really about could it happen.

If it did, as it's a complex issue there could well be complaints about how it gets implemented, would it be based on profit or turnover, will arber's losses be taken into calculations, etc.

[Kafkaesque]

And I would be surprised if Betfair agreed they are the bookmakers (Exchange bets). I would expect them to plead the facebook defence of "we are only the platform, not the supplier".

If that were the case, I would have thought Betfair would look to preempt it more. As things stand, account statements run with Exchange bets/trades lumped together with straight bets on the Sportsbook. Were BF to want to plead as you say, they would surely have seperate statements, possibly even wallets, for the two?

[spreadbetting]

Look we are getting into semantic details here … all I'm saying is that in my time as a tax consultant I have seen the Inland Revenue as it was then tax things that were thought to be tax free forever. They can tax anything they want if they have the desire to do so and quoting precedent won't get you anywhere because they have it in their power to change the law in their favour. If I was working for HMRC I think I could make a very good case now because the market has changed so much over the last 5 years … FFS we even call it trading! It is probably the only legal trading that is tax free and it's trading in an area that meets with PC disapproval so they would have no problems with the general public. For those reasons it sticks out like a sore thumb and would be an easy target to shoot down. We may get away with it for years, maybe for ever, I hope we do because most of my career was spent reducing tax bills and looking for tax free ways to do things. My accountant's initial reaction when I told him what I was doing was that he expected that it would be deemed trading for profit and I had to put him right.

I wasn't aware the OP was asking us to get the crystal balls out and look into the future. I thought he was simply asking about the current tax situation where as far as I'm aware HMRC have decided to leave that tin of worms well alone as it's not worth the effort or hassle to try and tax the odd few making a living solely off Betfair trading. I guess as a tax consultant overcomplicating things is always good for business though

At the end of the day we're all aware things can change , I doubt many of us foresaw Betfair screwing people over for 60% of their profits so it's more a case of make hay whilst the sun shines.

[firlandsfarm]

I guess as a tax consultant overcomplicating things is always good for business though

If overcomplicating includes being aware of what could happen in the future and taking a view if to ignore or consider precautionary action then I guess you are right. BTW tax consultants don't over complicate things, it's not their fault tax can be complicated to the man in the street, they just seek to mitigate tax liabilities and simplify the explanation to the client as best they can. I had many clients who after a change in taxation have said "I wish I knew they might do that".

[alexmr2]

higher rate commissions would probably have to go down then to compensate the taxes and keep pros trading otherwise the whole system would implode as smaller pros left the game since any level of tax may leave them with insufficient profit !

I also had similar thoughts about how counter-productive it could end up

Currently BF takes 60% PC from the big pros (which could easily be tens of thousands per customer), and then pays taxes on their profits and everyone gets along (reasonably) happy with the arrangement

If a tax is introduced on top of this, pros are going to be taking home what, >30% of their profit? I don't see many people sticking around putting millions in turnover through the markets just to get back the average household income. BF would also lose out either way if they lose traders altogether or just the PC income. Surely this would be detrimental to the gambling industry which is currently worth billions in tax revenue every year and manages to keep people poor and in work just like the government wants